Investors are used to hearing about the S&P 500 and the Dow Jones Industrial Average. Both of these indices track highly prominent companies whose stock prices factor heavily into the U.S. and global economy. The S&P 500 tracks the performance of 500 large companies listed on stock exchanges across the United States while the DJIA tracks 30.
These stocks are highly capitalized. But investors are also interested in small-cap equities as well. For that, the Russell 2000 is a great place to look. The Russell 2000 is a subset of its parent index, the Russell 3000.
The Russell 2000 tracks the 2000 smallest-cap companies within the Russell 3000. Those 2000 firms represent about 10% of the stock market’s capitalization. The Russell 1000, on the other hand, tracks the 1000 largest stocks within the Russell 3000. Those stocks collectively represent roughly 92% of the U.S. stock market.
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Essentially the Russell 2000 contains household names you and I are familiar with but which aren’t grabbing headline space for their stock performance necessarily. That said, let’s get into a handful of those stocks worth considering as potential rebound plays.
- Lattice Semiconductor (NASDAQ:LSCC)
- Crocs (NASDAQ:CROX)
- Performance Food Group (NYSE:PFGC)
- MasTec (NYSE:MTZ)
- BJ’s Wholesale Club (NYSE:BJ)
- Arrowhead Pharmaceuticals (NASDAQ:ARWR)
- Amkor (NASDAQ:AMKR)
Best Russell 2000 Stocks: Lattice Semiconductor (LSCC)
Lattice Semiconductor is a chip company that serves markets including communications and infrastructure, consumer electronics, industrial equipment, and licensing. The company has two primary businesses; its Semiconductor and intellectual property arm called Core Lattice, and its software as a service (SaaS) business called Qterics.
The company’s website heavily markets its Lattice sensAI stack. That stack is geared toward Field Programmable Gate Array machine learning and AI solutions. FPGAs are chips that can be customized by the end user after their production. AMD’s (NASDAQ:AMD) recent acquisition of Xilinx was done in strong consideration of the latter’s FPGA capability. That suggests Lattice Semiconductors could garner more attention moving forward as that deal moves along and Xilinx becomes more integrated into AMD’s business.
From a fundamental perspective, Lattice Semiconductor is attractive due to growth. In the third quarter, the company reported 28% YoY revenue growth, and 5% revenue growth sequentially from Q2. Gross margin increased by 230 basis points and net income increased by nearly 112% in Q3 YoY.
LSCC stock sits in the middle of its 52-week range and carries a consensus target price of $85.60
Source: Wannee_photographer / Shutterstock.com
There are many reasons to consider buying CROX stock right now. For one, it’s currently significantly down. Since November, its price has declined from $180 to around $101. The reason it could rise again has to do with the perception of its business in the current economic environment.
Most readers will be aware that inflation continues to get worse. January inflation numbers reached 7.5%, higher than the already high 7.2% expected. That’s going to put more pressure on the Federal Reserve to act. That pressure will likely lead to faster than anticipated hikes in interest rates which favors companies that provide tangible value.
Crocs is one of them. The ubiquitous foam rubber clogs are sold in more than 90 countries around the world and business is humming. In fact, Crocs expects to provide strong performance numbers in its upcoming earnings report.
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The firm is expecting to report 67% revenue growth for 2021 in the upcoming report. It also raised operating margin guidance to 30%. Those are strong signals that an increasingly value-oriented market won’t likely be able to ignore.
Best Russell 2000 Stocks: Performance Food Group (PFGC)
Performance Food Group is a firm that markets and distributes food and food related products. As I mentioned in the previous blurb about Crocs, value should be a strong consideration for the markets moving forward. So, for the same reasons that COX stock looks attractive now, so too does PFGC stock.
The company recently released its second quarter and first fiscal half 2022 earnings results. They were strong. Sales reached $23.2 billion for the first fiscal half of 2022, with $12.8 billion in Q2. Both of those figures represented strong increases of 67.2% and 87.6%, respectively. For the first half that resulted in profits of $2.4 billion which was a 48.8% increase. In Q2 profitability increased even more, by 57.7% to reach $1.3 billion.
The market is responding very positively to those results with PFGC stock jumping from $45 to $51 when the announcement was made on Feb. 9. The good news is that analysts consider it a buy and give it a target price of $64.27. That implies that there is room left for it to rise.
MasTec is a Florida based engineering firm that, builds and installs infrastructure across multiple industries. Those industries are segmented across communications, oil & gas, electrical transmission, and industrial and power generation.
Again, investors are likely to be seeking value given that pressure on the Fed to raise interest rates is going to ratchet up in light of January’s inflation figures. MasTec, with its strong fundamental performance, will become increasingly attractive.
MasTec is in a good position now. It reported a record $2.4 billion in Q3 revenue which represented a 42% increase on a year-over-year basis. That led to a net income of $112.5 million and EPS and diluted EPS figures which exceeded expectations.
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Investors are likely to be seeking value. MTZ stock carries a trailing P/E ratio of 18.21. The trailing twelve month P/E ratio of the Russell 2000 is around 100. That suggests it will be much more attractive as investors are likely to seek value-oriented firms rather than seek high growth prospects.
Best Russell 2000 Stocks: BJ’s Wholesale Club (BJ)
Source: Helen89 / Shutterstock.com
BJ’s Wholesale Club is attractive right now because its business is at the confluence of powerful forces driving the economy right now. The bulk wholesaler provides consumer staple goods that always perform well in tight economies. January’s inflation numbers are a very strong indication that the economy is tightening. Consumers are going to gravitate toward the things that they need and at the cheapest prices.
BJ’s goal is “consistently offering 25% or more savings on a representative basket of manufacturer-branded groceries compared to traditional supermarket competitors.” The weaker the dollar, the more attractive BJ’s becomes.
BJ’s isn’t taking any chances in its ability to compete in this environment. That means it will bring more of its supply chain and logistics in-house in order to maximize results. BJ’s recently purchased four distribution centers along with the trucking fleets associated with them.
Those distribution centers are located in Connecticut, Florida, Kentucky, and Maryland. The deal should close in the second quarter and should result in increased supply chain efficiencies for the wholesale club. BJ stock has been steadily rising over the past year but suffered a momentary lull. That may be a great chance to catch the rebound as plans are taking shape which should result in a stronger business.
Arrowhead Pharmaceuticals (ARWR)
Source: Pavel Kapysh / Shutterstock.com
Arrowhead Pharmaceuticals is a genome therapeutics company. It utilizes RNA chemistry which turns off genes that cause intractable diseases. Arrowhead Pharmaceuticals’ leading candidate therapeutics target liver diseases primarily.
Its investigational candidates are being developed in collaboration with some of the largest names in the pharmaceutical business including Johnson & Johnson’s (NYSE:JNJ) pharma arm, Janssen, GlaxoSmithKline (NYSE:GSK), and Takeda Pharmaceutical (NYSE:TAK)
Arrowhead Pharmaceuticals entered into an agreement with GSK to develop and commercialize its investigational drug currently in Phase 1/2 clinical trials for the treatment of steatohepatitis.
Although ARWR stock carries a consensus target price of $85 and currently trades at $50, there’s clear risk. For one, it is a pharma stock. Pharmaceutical stocks are very hit or miss by their nature. Revenues are highly dependent on the success of candidate drugs passing successfully through the clinical trial process. Arrowhead has secured the collaboration of well-heeled pharmaceutical giants. That is a positive signal, but not a guarantee.
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Further, the market will likely favor firms with proven revenues as the Fed tightens monetary supply. That said, ARWR stock could shoot up as Phase 3 clinical trial info related to its ARO-APOC3 drug trickles in.
Best Russell 2000 Stocks: Amkor (AMKR)
Amkor provides semiconductor packaging and test services to integrated device manufacturers (IDMs), foundries, and fabless chip firms.
The firm reported record sales of $1.68 billion, up 24% on a year-over-year basis. Those record revenues resulted in record gross profit of $325 million and record operating income of $211 million.
Amkor was among the pioneering firms in integrated chip packaging and testing services. It is now integral to the semiconductor supply chain. That should give it an edge as semiconductors’ importance isn’t relenting.
Amkor also recently declared a quarterly dividend of five cents. That dividend has grown rapidly since its inception in late 2020. It recently increased from four cents to five cents. If it follows its historical trajectory it could rise to six cents in a few quarters.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
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