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.
Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. Keeping that in mind, here are three Russell 2000 stocks to avoid and better alternatives to consider.
CONMED (CNMD)
Market Cap: $1.25 billion
With over five decades of experience in surgical innovation since its founding in 1970, CONMED (NYSE: CNMD) develops and manufactures medical devices and equipment for surgical procedures, specializing in orthopedic and general surgery products.
Why Are We Wary of CNMD?
- Sales trends were unexciting over the last two years as its 7.4% annual growth was below the typical healthcare company
- Smaller revenue base of $1.35 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Estimated sales growth of 1.8% for the next 12 months implies demand will slow from its two-year trend
CONMED is trading at $40.30 per share, or 9.3x forward P/E. If you’re considering CNMD for your portfolio, see our FREE research report to learn more.
United Community Banks (UCB)
Market Cap: $3.92 billion
Starting as a small community bank in 1950 and expanding through strategic acquisitions across the Southeast, United Community Banks (NYSE: UCB) is a regional bank holding company that provides financial services including loans, deposits, wealth management, and merchant services across the southeastern United States.
Why Are We Hesitant About UCB?
- Annual revenue growth of 4.1% over the last two years was below our standards for the banking sector
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 6.2% annually
- Estimated tangible book value per share growth of 9.3% for the next 12 months is soft and implies weaker profitability
United Community Banks’s stock price of $32.29 implies a valuation ratio of 1.1x forward P/B. Dive into our free research report to see why there are better opportunities than UCB.
DigitalBridge (DBRG)
Market Cap: $2.56 billion
Transforming from a traditional real estate investor to a digital-focused powerhouse in 2021, DigitalBridge Group (NYSE: DBRG) is a global digital infrastructure investment firm that manages capital and operates assets across data centers, cell towers, fiber networks, and edge infrastructure.
Why Do We Think Twice About DBRG?
- Sales tumbled by 37.5% annually over the last five years, showing market trends are working against its favor during this cycle
- Low return on equity reflects management’s struggle to allocate funds effectively
- Unprofitable operations could lead to additional rounds of dilutive equity financing if the credit window closes
At $13.83 per share, DigitalBridge trades at 1.7x forward P/E. Check out our free in-depth research report to learn more about why DBRG doesn’t pass our bar.
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-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.
