3 Russell 2000 Stocks in Hot Water
The Russell 2000 (^RUT) is home to many small-cap stocks, offering investors the chance to uncover hidden gems before the broader market catches on. However, these companies often come with higher volatility and risk, as their smaller size makes them more vulnerable to economic downturns.
Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. That said, here are three Russell 2000 stocks to steer clear of and some alternatives to watch instead.
Zumiez (ZUMZ)
Market Cap: $229.2 million
With store associates called “Zumiez Stash Members”, Zumiez (NASDAQ:ZUMZ) is a specialty retailer of street and skate apparel, footwear, and accessories.
Why Are We Out on ZUMZ?
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Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
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Suboptimal cost structure is highlighted by its history of operating margin losses
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Earnings per share have contracted by 57.7% annually over the last six years, a headwind for returns as stock prices often echo long-term EPS performance
Zumiez’s stock price of $12.90 implies a valuation ratio of 49x forward P/E. If you’re considering ZUMZ for your portfolio, see our FREE research report to learn more.
MYR Group (MYRG)
Market Cap: $2.83 billion
Constructing electrical and phone lines in the American Midwest dating back to the 1890s, MYR Group (NASDAQ:MYRG) is a specialty contractor in the electrical construction industry.
Why Do We Avoid MYRG?
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New orders were hard to come by as its backlog was flat over the past two years
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Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 1.9% annually
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Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $182.61 per share, MYR Group trades at 29.1x forward P/E. Dive into our free research report to see why there are better opportunities than MYRG.
Arbor Realty Trust (ABR)
Market Cap: $2.03 billion
With roots dating back to 2003 and a focus on the stability of multifamily housing, Arbor Realty Trust (NYSE:ABR) is a specialized lender that provides financing solutions for multifamily and commercial real estate while also originating and servicing government-backed mortgage loans.
Why Should You Sell ABR?
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Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.8% annually over the last two years
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Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
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Loan losses and capital returns have eroded its tangible book value per share this cycle as its tangible book value per share declined by 2.3% annually over the last two years
Arbor Realty Trust is trading at $10.62 per share, or 0.9x forward P/B. To fully understand why you should be careful with ABR, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
