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Today's Exclusive Article
3 Small-Cap Stocks to Buy as the Russell 2000 Extends Its RallyAuthored by Chris Markoch. Article Published: 5/11/2026. 
Key Points
- The Russell 2000 has surged more than 40% over the last year as investors rotate into undervalued small-cap stocks.
- Academy Sports, Buckle, and Core Molding Technologies each offer unique catalysts tied to retail resilience and industrial growth.
- Falling interest rates and attractive valuations could create additional upside for select small-cap stocks in 2026.
- Special Report: Have $500? Invest in Elon’s AI Masterplan
The Russell 2000 index, which is frequently seen as a proxy for small-cap stocks, is up more than 8% in the 30 days ending May 8. That’s a continuation of a trend that has been in place over the last year. Over the past 12 months, the index is up more than 40%. The good news for investors is that there's likely more upside ahead. Many of these stocks are trading at a discount to the S&P 500 based on their price-to-earnings (P/E) ratio as well as their individual sectors. This valuation gap has historically served as a tailwind for small-cap outperformance, particularly during periods of economic expansion and falling interest rates. With the Federal Reserve signaling a more accommodative stance, conditions may be setting up for another leg higher in small-cap equities.
Goldman Sachs just revealed that 40% of AI data centers will be crippled by electricity shortages by 2027 - not chips, not funding, but power. Demand is growing 15% per year and the grid can't keep up.
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That said, sometimes stocks are cheap for a reason. However, each of the stocks on this list has been carefully selected and has catalysts that give investors reason to believe in their long-term upside. Here are three small-cap names worth watching. A Niche Retailer With Room to RunAcademy Sports and Outdoors (NASDAQ: ASO) occupies a specialty niche in the sporting goods and outdoor gear space. ASO has staged a strong rally from the 52-week low it hit when the Trump administration announced its Liberation Day tariffs. The stock is up 35% in the 12 months ending May 8. That’s not without reason. The company has managed to deliver slight year-over-year growth in revenue and earnings, unlike many consumer discretionary stocks. Despite that growth, ASO still has a forward P/E ratio of around 9x, which is a substantial discount to the S&P 500, but a premium to the company’s historic average. ASO is now approximately 7% below its consensus price target of $58.57, and the consensus rating on the stock is a Hold. In its Q4 2025 earnings report, the company warned that consumer weakness and tariff impacts could mean earnings come in at the lower end of its guidance. Investors will have to wait until June 9 for the company’s next report. It could be revealing, particularly if the cracks that are starting to show in the consumer begin to widen. Before then, investors will get another round of inflation and jobs data. A Dividend-Growing Apparel Play With Loyal CustomersBuckle Inc. (NYSE: BKE) has been one of the best-performing retail stocks in the past 12 months. BKE is up more than 40% in that time. The apparel and footwear company’s blend of contemporary style and everyday comfort has lifted both revenue and earnings over the last year. At 13x earnings, the stock is attractively valued compared with the broadline retail sector. However, as of this writing, BKE is trading very close to its consensus price target of $53. It’s worth noting that MarketBeat shows only two analysts covering the stock. Buckle is another stock that will reflect the state of the consumer. Some early earnings reports suggest pressure on lower-income consumers, but that's not necessarily Buckle’s target audience. One soft spot in the company’s Q4 2026 earnings report was elevated inventory. However, management noted that this was done in anticipation of increased denim demand. Investors will see how that plays out on May 22 when the company reports earnings. Of particular interest to some investors is the company’s dividend, which has increased at an average annual rate of around 11% over the last five years. Plus, in 2024 and 2025, the company has issued a special dividend to shareholders. A Small-Cap Industrial Poised for a Second-Half SurgeIndustrials have been a strong sector as demand for data centers and broader infrastructure upgrades continues to play out. One name to consider is Core Molding Technologies (NYSEAMERICAN: CMT). The company has a market cap of just over $230 million as of this writing. But CMT has delivered a strong return for investors over the last 12 months, climbing more than 70%. The company reported its Q1 2026 earnings report on May 7, and the stock fell on concerns about truck-cycle softness and the impact on free cash flow as it expands its investments in Mexico. However, those plans are ahead of schedule. That’s where investors may see a favorable setup. The post-earnings dip could have been expected after such a strong rally. But if the company’s forecasts for year-over-year revenue and earnings acceleration into the second half of the year are correct, this could be a time for investors to accumulate shares on the dip. |
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