Small-cap stocks in the Russell 2000 (^RUT) can be a goldmine for investors looking beyond the usual large-cap names. But with less stability and fewer resources than their bigger counterparts, these companies face steeper challenges in scaling their businesses.
The high-risk, high-reward nature of the Russell 2000 makes stock selection critical, and we’re here to guide you toward the right ones. That said, here are three Russell 2000 stocks to steer clear of and some alternatives to watch instead.
Academy Sports (ASO)
Market Cap: $3.29 billion
Founded in 1938 as a tire shop before expanding into fishing equipment, Academy Sports & Outdoor (NASDAQ:ASO) sells a broad selection of sporting goods but is still known for its outdoor activity merchandise.
Why Is ASO Not Exciting?
- Sales tumbled by 3.1% annually over the last three years, showing consumer trends are working against its favor
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Widely-available products (and therefore stiff competition) result in an inferior gross margin of 34.2% that must be offset through higher volumes
At $49.40 per share, Academy Sports trades at 7.8x forward P/E. Check out our free in-depth research report to learn more about why ASO doesn’t pass our bar.
Alamo (ALG)
Market Cap: $1.97 billion
Expanding its markets through acquisitions since its founding, Alamo (NSYE:ALG) designs, manufactures, and services vegetation management and infrastructure maintenance equipment for governmental, industrial, and agricultural use.
Why Does ALG Fall Short?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 1.3% annually over the last two years
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 25.5%
- Earnings per share have dipped by 5.7% annually over the past two years, which is concerning because stock prices follow EPS over the long term
Alamo is trading at $162.92 per share, or 14.2x forward P/E. To fully understand why you should be careful with ALG, check out our full research report (it’s free for active Edge members).
CVB Financial (CVBF)
Market Cap: $2.70 billion
With roots dating back to 1974 and a focus on serving small and medium-sized businesses, CVB Financial (NASDAQ:CVBF) operates Citizens Business Bank, providing banking, lending, and trust services to businesses and individuals across California.
Why Do We Steer Clear of CVBF?
- Muted 1.4% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 2.4% annually
- 3% annual tangible book value per share growth over the last five years was slower than its banking peers
CVB Financial’s stock price of $19.78 implies a valuation ratio of 1.2x forward P/B. If you’re considering CVBF for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% 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
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