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.
Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. That said, here are three Russell 2000 stocks to avoid and better alternatives to consider.
Utz (UTZ)
Market Cap: $872.2 million
Tracing its roots back to 1921 when Bill and Salie Utz began making potato chips in their kitchen, Utz Brands (NYSE: UTZ) offers salty snacks such as potato chips, tortilla chips, pretzels, cheese snacks, and ready-to-eat popcorn, among others.
Why Are We Out on UTZ?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Subscale operations are evident in its revenue base of $1.44 billion, meaning it has fewer distribution channels than its larger rivals
- Underwhelming 0.3% return on capital reflects management’s difficulties in finding profitable growth opportunities
At $10.43 per share, Utz trades at 11.7x forward P/E. Read our free research report to see why you should think twice about including UTZ in your portfolio.
Fresh Del Monte Produce (FDP)
Market Cap: $1.72 billion
Translating to "of the mountain" in Spanish, Fresh Del Monte (NYSE: FDP) is a leader in providing high-quality, sustainably grown fresh fruits and vegetables.
Why Do We Avoid FDP?
- Products fail to spark excitement with consumers, as seen in its flat sales over the last three years
- Forecasted revenue decline of 2.9% for the upcoming 12 months implies demand will fall off a cliff
- Gross margin of 8.2% is below its competitors, leaving less money to invest in areas like marketing and production facilities
Fresh Del Monte Produce’s stock price of $35.98 implies a valuation ratio of 12.7x forward P/E. To fully understand why you should be careful with FDP, check out our full research report (it’s free for active Edge members).
Ruger (RGR)
Market Cap: $518.5 million
Founded in 1949, Ruger (NYSE: RGR) is an American manufacturer of firearms for the commercial sporting market.
Why Should You Dump RGR?
- Sales trends were unexciting over the last five years as its 1.4% annual growth was below the typical consumer discretionary company
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 6.9% for the last two years
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Ruger is trading at $32.31 per share, or 20.9x forward P/E. Dive into our free research report to see why there are better opportunities than RGR.
Stocks We Like More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out 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 Tecnoglass (+1,754% 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.
