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.
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 is one Russell 2000 stock that could be a breakout winner and two that may face some trouble.
Two Stocks to Sell:
Matthews (MATW)
Market Cap: $820.8 million
Originally a death care company, Matthews International (NASDAQ: MATW) is a diversified company offering ceremonial services, brand solutions and industrial technologies.
Why Do We Steer Clear of MATW?
- Products and services have few die-hard fans as sales have declined by 1.9% annually over the last five years
- Negative free cash flow raises questions about the return timeline for its investments
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Matthews is trading at $27.11 per share, or 0.6x trailing 12-month price-to-sales. Dive into our free research report to see why there are better opportunities than MATW.
Worthington (WOR)
Market Cap: $2.80 billion
Founded by a steel salesman, Worthington (NYSE: WOR) specializes in steel processing, pressure cylinders, and engineered cabs for commercial markets.
Why Is WOR Risky?
- Annual sales declines of 14.9% for the past five years show its products and services struggled to connect with the market during this cycle
- Earnings per share have dipped by 28.8% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Worthington’s stock price of $56.70 implies a valuation ratio of 15.1x forward P/E. Read our free research report to see why you should think twice about including WOR in your portfolio.
One Stock to Watch:
Clover Health (CLOV)
Market Cap: $1.08 billion
Founded in 2014 to improve healthcare for America's seniors through technology, Clover Health (NASDAQ: CLOV) provides Medicare Advantage plans for seniors with a focus on affordable care and uses its proprietary Clover Assistant software to help physicians manage patient care.
Why Is CLOV on Our Radar?
- Customer growth averaged 34.7% over the past two years, showing its ability to "land" new contracts and potentially "expand" them later - a powerful one-two punch for sales
- Earnings per share grew by 19.1% annually over the last four years and trumped its peers
- Cash burn has decreased over the last five years, showing the company is becoming a more self-sustaining business
At $2.10 per share, Clover Health trades at 29.9x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even 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 Growth Stocks for this month. 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.
