Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
AAR (AIR)
Market Cap: $3.39 billion
The first third-party MRO approved by the FAA for Safety Management System Requirements, AAR (NYSE: AIR) is a provider of aircraft maintenance services
Why Are We Wary of AIR?
- Low free cash flow margin of 0.7% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its shrinking returns suggest its past profit sources are losing steam
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $85.73 per share, AAR trades at 10.9x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including AIR in your portfolio.
Belden (BDC)
Market Cap: $4.62 billion
With its enamel-coated copper wire used in WWI for the Allied forces, Belden (NYSE: BDC) designs, manufactures, and sells electronic components to various industries.
Why Do We Think Twice About BDC?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Earnings per share lagged its peers over the last two years as they only grew by 1.8% annually
- Diminishing returns on capital suggest its earlier profit pools are drying up
Belden is trading at $116.35 per share, or 15.4x forward P/E. Check out our free in-depth research report to learn more about why BDC doesn’t pass our bar.
Oaktree Specialty Lending (OCSL)
Market Cap: $1.22 billion
Managed by Oaktree Capital Management, one of the world's premier alternative investment firms, Oaktree Specialty Lending (NASDAQ: OCSL) is a business development company that provides customized financing solutions to mid-market companies across various industries.
Why Should You Sell OCSL?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 1.9% annually over the last two years
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
- Annual tangible book value per share declines of 1.7% for the past five years show its capital management struggled during this cycle
Oaktree Specialty Lending’s stock price of $13.83 implies a valuation ratio of 4x forward price-to-sales. If you’re considering OCSL for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Fresh US-China trade tensions just tanked stocks—but strong bank earnings are fueling a sharp rebound. Don’t miss the bounce.
Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. 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 Comfort Systems (+782% 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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