The Russell 2000 Index is a widely followed benchmark that tracks the performance of small-cap companies in the United States. This index includes the smallest 2,000 companies, ranging from a few hundred million to a few billion dollars in market capitalization. These companies are often seen as more growth-oriented and can be more volatile compared to their large-cap counterparts. Investors and analysts use the performance of the Russell 2000 Index to gauge the health and trends of the small-cap segment of the U.S. equity market, which can provide insights into broader economic conditions and investor sentiment toward smaller, potentially higher-growth companies.
The Russell 2000 Index has demonstrated significant strength over the past years. As of January 17, the index stands at 2,278.01, with a 19.07% increase over the past year and a remarkable 34.03% increase over the past five years. This robust growth reflects the resilience and potential of small-cap companies in the United States and highlights the strong investor sentiment and economic conditions that have favored small-cap stocks.
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In an interview with CNBC on January 17, Chris Retzler, Portfolio Manager of Small Cap Growth Fund at Needham Asset Management, discussed the current state and future prospects of small-cap stocks in the US market. Retzler acknowledged that while small-cap stocks, as represented by the Russell 2000 Index, have struggled compared to larger indices such as the S&P 500 and Nasdaq, there are signs of improvement, as the Russell 2000 has managed to break out of correction territory for four consecutive days, which is a positive signal.
Retzler emphasized that small-cap companies are looking for certainty in the U.S. economy, which is poised to have at some point in a few weeks or months. Once this certainty is established, Retzler expects to see an acceleration in market activity, driven by increased confidence and broader market participation. He highlighted the significant innovation occurring in sectors such as electric vehicles, semiconductors, and new materials, which could provide opportunities for small-cap companies to thrive. Retzler mentioned that infrastructure is also another key area of focus. He cited data centers and power supply as critical areas where infrastructure gaps are evident. The push for bringing manufacturing back to the U.S. is also creating a demand for more robust infrastructure to support these industries.
The discussion also touched on the challenges and opportunities presented by higher interest rates and the Federal Reserve’s pause in rate hikes. Retzler noted that while interest rates are higher, the yield curve is becoming healthier, with favorable conditions for lending, particularly through regional banks. Retzler acknowledged that lower interest rates would definitely benefit small-cap companies, however, the long-term bond rates are still relatively high, and there is a need to address the deficit spending and demand in the bond market before bringing interest rates down further.
Retzler emphasized the importance of a business-friendly regulatory environment, which includes tax incentives and deregulation. He noted that small-cap companies have often been overburdened by regulatory requirements, and any move toward deregulation could significantly benefit these firms. Tax incentives, in particular, can play a crucial role in encouraging companies to bring their manufacturing operations back to the U.S., which can lead to job creation and economic growth. Additionally, tax incentives can help reduce the cost of doing business, making it easier for small-cap companies to compete and expand. He also suggested that if the regulatory environment becomes more business-friendly, including potential deregulation, it could lead to more mergers and acquisitions (M&A) and a healthier IPO market.
The current economic conditions are becoming favorable for small-cap companies, with improvements in the economy, declining interest rates, and the potential for deregulation. These factors should benefit small-cap stocks and support their future growth. With that in context, let’s take a look at the 10 best Russell 2000 stocks to invest in according to analysts.
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Our Methodology
To compile our list of the 10 best Russell 2000 stocks to invest in according to analysts, we used Finviz and Yahoo stock screeners to find the 40 largest Russell 2000 companies. We then sourced the analysts’ average price targets and picked the 10 stocks that had the highest upside potential. We also included their stock price as of January 16 and their hedge fund sentiment, which was taken from Insider Monkey’s Hedge Fund database of 900 elite hedge funds as of Q3 of 2024. The list is sorted in ascending order of analysts’ average upside potential as of January 16.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Russell 2000 Stocks to Invest in According to Analysts
10. Fluor Corporation (NYSE:FLR)
Upside Potential: 17.88%
Stock Price as of January 16: $48.99
Number of Hedge Fund Investors: 29
Fluor Corporation (NYSE:FLR) is a global company that provides engineering, procurement, construction, maintenance, and project management services. The company offers a diverse portfolio of services spanning multiple industries, including oil and gas, mining and metals, urban solutions, advanced technologies, and infrastructure.
Fluor Corporation (NYSE:FLR) is actively diversifying its portfolio to capitalize on emerging market trends and reduce dependency on traditional sectors. The company has made significant strides in expanding its footprint in non-traditional oil and gas projects. This diversification is driven by a strategic focus on energy transition, low-carbon power projects, and the chemical industry, particularly in the Middle East. Fluor Corporation (NYSE:FLR) is involved in large liquids-to-chemicals projects and is positioning itself to benefit from the growing demand for battery chemicals and chemical recycling.
Fluor Corporation (NYSE:FLR) is pursuing strategic partnerships and new business opportunities to drive growth. The company has been selected for several high-profile projects, including the Minera Escondida Concentrator Program in Chile, the Hanford Integrated Tank Disposition Contract in Washington State, and the engineering study for a centrifuge pilot plant as part of the National Nuclear Security Administration’s Domestic Uranium Enrichment Centrifuge Experiment Program. Furthermore, Fluor Corporation (NYSE:FLR) is making significant progress on the RoPower small modular nuclear reactor project in Romania, which is expected to support the country’s transition to carbon-free power generation.
9. Old National Bancorp (NASDAQ:ONB)
Upside Potential: 18.38%
Stock Price as of January 16: $22.53
Number of Hedge Fund Investors: 20
Old National Bancorp (NASDAQ:ONB) is a regional banking organization serving customers across the Midwest United States. The bank offers a wide range of financial products, including personal and business banking, loans, mortgages, and wealth management services. Old National Bancorp’s (NASDAQ:ONB) clients include individuals, small businesses, and corporations.
Old National Bancorp (NASDAQ:ONB) is making strategic investments in fee-income businesses, particularly in treasury management and wealth management. These areas offer longer-term returns and are seen as key drivers of future growth. The company is actively seeking to attract top talent in these sectors and believes that high-caliber professionals can significantly contribute to the expansion of these businesses. Additionally, Old National Bancorp (NASDAQ:ONB) is leveraging its strong network of existing customer relationships to cross-sell fee-based services. The focus on fee income is part of a broader strategy to reduce reliance on net interest income and create a more diversified revenue model.
Old National Bancorp (NASDAQ:ONB) is also driving organic deposit growth to fund its asset generation. The company is focusing on a proactive deposit strategy, which includes competitive pricing and a focus on client acquisition. Furthermore, Old National Bancorp (NASDAQ:ONB) is maintaining a proactive approach to credit management, with a more conservative risk rating approach to avoid credit losses.
8. The Ensign Group, Inc. (NASDAQ:ENSG)
Upside Potential: 22.67%
Stock Price as of January 16: $136.55
Number of Hedge Fund Investors: 31
The Ensign Group, Inc. (NASDAQ:ENSG) is a holding company that provides healthcare services and owns healthcare real estate. The company operates a network of skilled nursing, rehabilitative care, and assisted living facilities across 14 states in the United States. The company focuses on providing high-quality healthcare services tailored to the elderly and individuals with complex medical needs.
The Ensign Group, Inc. (NASDAQ:ENSG) is focused on expanding its geographic reach and increasing market density. The company recently completed nine new acquisitions in Colorado, one in Kansas, one in Iowa, and one in Nebraska. These new acquisitions have added 1,279 new skilled nursing beds and 20 senior living units in 4 states. By doing so, the company aims to cluster operations in specific markets to create synergies and leverage shared resources, leading to more efficient and effective service delivery. This strategy also allows the company to build stronger relationships with acute care partners.
The Ensign Group, Inc. (NASDAQ:ENSG) is also focusing on improving occupancy and financial performance. Furthermore, The Ensign Group, Inc. (NASDAQ:ENSG) has a robust pipeline of acquisition opportunities and remains disciplined in its approach, ensuring that each new operation aligns with its strategic goals.
7. SouthState Corporation (NYSE:SSB)
Upside Potential: 22.81%
Stock Price as of January 16: $98.35
Number of Hedge Fund Investors: 24
SouthState Corporation (NYSE:SSB) is a leading financial services company that offers a wide range of banking and financial solutions, including commercial and consumer banking, wealth management, and mortgage services.
SouthState Corporation (NYSE:SSB) is actively expanding its market presence and scale through strategic acquisitions and organic growth. One of the most significant recent developments is the merger with Independent Financial, which is expected to significantly enhance the company’s footprint in Texas and Colorado. This merger will bring together two well-respected financial institutions, combining Independent Financial’s strong commercial real estate (CRE) and community banking expertise with SouthState Corporation’s (NYSE:SSB) treasury management platform and diverse product offerings. The integration of these teams and resources is expected to drive long-term shareholder value and create a more resilient and diversified business model.
SouthState Corporation (NYSE:SSB) is investing heavily in its treasury management and commercial and industrial (C&I) banking services to better serve its clients and drive revenue growth. The company is leveraging its advanced treasury management platform to provide sophisticated financial solutions to middle-market and commercial clients. This platform is a key differentiator, enabling SouthState Corporation (NYSE:SSB) to offer a wide range of services, including cash management, payment solutions, and risk management tools. By enhancing these services, SouthState Corporation (NYSE:SSB) aims to attract and retain high-value clients in the C&I segment.
6. Clearwater Analytics Holdings, Inc. (NYSE:CWAN)
Upside Potential: 22.81%
Stock Price as of January 16: $27.05
Number of Hedge Fund Investors: 18
Clearwater Analytics Holdings, Inc. (NYSE:CWAN) is a leading provider of investment accounting, reporting, and analytics solutions that serves a diverse clientele across the financial services industry. The company’s comprehensive solutions are designed to streamline investment management processes, enhance data integrity, and provide actionable insights. Clearwater Analytics Holdings, Inc. (NYSE:CWAN) has over 1,400 clients across five continents.
Clearwater Analytics Holdings, Inc. (NYSE:CWAN) is at the forefront of integrating generative AI (GenAI) into its platform to drive both efficiency and growth. The company’s platform provides a rich and comprehensive data set, which is crucial for training GenAI models. By leveraging this data, Clearwater Analytics Holdings, Inc. (NYSE:CWAN) aims to transform internal workflows and enhance client interactions. Clearwater Analytics Holdings, Inc. (NYSE:CWAN) has already shown significant progress in this regard, and its platform now supports real-time, conversational interactions with investment data, allowing clients to access and analyze information more intuitively. This not only improves user experience but also drives operational efficiency, as GenAI is increasingly used to resolve client inquiries in near real-time, reducing the resolution time from hours to minutes. The company’s investment in GenAI is a strategic move to maintain its competitive edge and deliver unparalleled value to its clients.
Clearwater Analytics Holdings, Inc. (NYSE:CWAN) is also actively expanding its presence in international markets, recognizing the significant growth potential in regions such as Europe and Asia. The company has made strategic hires to strengthen its leadership in these regions. Furthermore, the company has implemented several initiatives to deepen client relationships and expand revenue from current clients.
5. Insmed Incorporated (NASDAQ:INSM)
Upside Potential: 23.32%
Stock Price as of January 16: $71.47
Number of Hedge Fund Investors: 25
Insmed Incorporated (NASDAQ:INSM) is a biopharmaceutical company focused on developing therapies for rare diseases. The company’s lead product, Arikayce, treats patients with refractory nontuberculous mycobacterial lung infections. Insmed Incorporated (NASDAQ:INSM) is also advancing other pipeline candidates targeting pulmonary and orphan diseases.
Insmed Incorporated (NASDAQ:INSM) is focusing on broadening Arikayce’s market reach by expanding its sales force and optimizing its distribution channels to ensure that the treatment is accessible to patients in both academic centers and community pulmonologist offices. Additionally, Insmed Incorporated (NASDAQ:INSM) is actively pursuing label expansion for Arikayce. The Phase 2 ENCORE study, which is evaluating Arikayce in a broader patient population, has exceeded its target enrollment, ensuring that the study is well-powered for both U.S. and Japanese regulatory requirements. Insmed Incorporated (NASDAQ:INSM) plans to meet with the FDA to discuss the possibility of an accelerated filing, which could expedite the approval process and further enhance Arikayce’s market potential.
Furthermore, Insmed Incorporated (NASDAQ:INSM) is also advancing the potential launch of brensocatib, a first-in-class dipeptidyl peptidase 1 (DPP1) inhibitor, for the treatment of bronchiectasis. The company has nearly tripled its U.S. sales force to 184 representatives and has strategically deployed across the country based on claims data to ensure that they can effectively reach and educate healthcare providers about the benefits of brensocatib. Insmed Incorporated (NASDAQ:INSM) is expecting a decision from the FDA in the first quarter of 2025. The company is also exploring additional indications for brensocatib, including chronic rhinosinusitis without nasal polyps (CRSsNP) and hidradenitis suppurativa (HS), both of which are in Phase 2 clinical trials.
4. FTAI Aviation Ltd. (NASDAQ:FTAI)
Upside Potential: 52.61%
Stock Price as of January 16: $124.93
Number of Hedge Fund Investors: 26
FTAI Aviation Ltd. (NASDAQ:FTAI) specializes in aircraft leasing and aviation-related equipment solutions. The company provides engines and aircraft leasing services to airlines, cargo operators, and the defense sector. FTAI Aviation Ltd.’s (NASDAQ:FTAI) innovative maintenance programs help clients maximize asset utilization and reduce operational costs.
FTAI Aviation Ltd. (NASDAQ:FTAI) is focusing on expanding its production capacity. The company recently completed the acquisition of Lockheed Martin Commercial Engine Solutions, an aircraft engine maintenance repair facility located in Montreal from Lockheed Martin Canada. The acquisition, now known as FTAI Canada, aims to enhance the company’s ability to produce and deliver high-quality engine modules. The company has also repurposed employees and invested in new parts and equipment to optimize the facility’s productivity. Moreover, FTAI Aviation Ltd. (NASDAQ:FTAI) has recently announced the sale of its remaining offshore energy vessels, the Pioneer and the Pride, for approximately $143 million, to streamline its operations and concentrate on its aircraft business. The proceeds from the sale will be reinvested in the company’s core business.
FTAI Aviation Ltd. (NASDAQ:FTAI) recently faced challenges when Muddy Waters, a well-known short-selling firm, issued a critical report on the company, which led to a significant 24% drop in the company’s stock price. In response to this sharp decline, Citi, Morgan Stanley along with other Wall Street analysts defended the company and its business. Citi analyst Stephen Trent expressed skepticism about some of the key arguments presented in the Muddy Waters report, noting that they seemed “a little hard to understand” from his perspective.
3. Vaxcyte, Inc. (NASDAQ:PCVX)
Upside Potential: 72.41%
Stock Price as of January 16: $86.94
Number of Hedge Fund Investors: 30
Vaxcyte, Inc. (NASDAQ:PCVX) is a biotechnology company that is developing next-generation pneumococcal conjugate vaccines (PCVs) to prevent bacterial infections such as invasive pneumococcal disease (IPD). The company leverages its cell-free protein synthesis platform to create vaccines that offer broader and more effective protection against a wide range of pneumococcal diseases.
Vaxcyte, Inc. (NASDAQ:PCVX) is strategically focusing on advancing its VAX-31 pneumococcal conjugate vaccine, into Phase 3 trials. This decision was driven by the Phase 1/2 data that VAX-31 showed met non-inferiority criteria for the 20 serotypes similar to Pfizer’s Prevnar 20 and demonstrated superiority for the 11 additional serotypes. This expanded coverage addresses a critical gap in the existing PCV market, where existing vaccines such as Pfizer’s Prevnar 20 and Merck’s Capvaxive (21-valent) cover a significant but not comprehensive range of serotypes. By targeting a wider array of serotypes, VAX-31 aims to reduce the overall burden of IPD and potentially capture a larger market share.
Furthermore, Vaxcyte, Inc. (NASDAQ:PCVX) is also investing in additional research and development activities for other vaccines, such as advancing the VAX-24 and VAX-31 in pediatric populations and exploring new vaccine targets.
2. Summit Therapeutics Inc. (NASDAQ:SMMT)
Upside Potential: 80.39%
Stock Price as of January 16: $17.85
Number of Hedge Fund Investors: 21
Summit Therapeutics Inc. (NASDAQ:SMMT) is a biotechnology company headquartered in Miami, Florida, that has emerged as a formidable player in the oncology space, particularly in the treatment of lung cancer. The company is challenging the dominance of pharmaceutical giants such as Merck (NYSE:MRK) with its lead asset, ivonescimab, a bispecific antibody developed in collaboration with Chinese biotech company Akeso.
Summit Therapeutics Inc. (NASDAQ:SMMT) is aggressively advancing its lead candidate, ivonescimab, a PD(L)1xVEGF bispecific, which has shown promising results in clinical trials, positioning Summit Therapeutics Inc. (NASDAQ:SMMT) to potentially disrupt the current treatment landscape and capture a significant share of the global oncology market. The company has already reported encouraging data from a Phase 3 trial conducted in China, where ivonescimab outperformed Merck’s Keytruda, a leading immunotherapy in the Non-small cell lung cancer (NSCLC) market. This landmark achievement marks ivonescimab as the first drug to outperform Keytruda in a Phase 3 randomized trial for NSCLC, setting the stage for further clinical and commercial success.
Two pivotal trials, HARMONi and HARMONi-2, are currently underway, with data expected to be released in the coming year. These trials are crucial for the company, as positive results could pave the way for ivonescimab to gain regulatory approval and market access in the United States and Europe, starting in 2026. The company is optimistic that the data will support the drug’s potential to become a treatment for NSCLC, thereby significantly expanding its addressable market.
Truist Securities, a leading investment firm, has recently issued a buy recommendation for Summit Therapeutics Inc. (NASDAQ:SMMT), citing the company’s strong clinical data and promising deal-forming prospects. Truist analyst Asthika Goonewardene has set a $35 target on Summit Therapeutics Inc. (NASDAQ:SMMT), reflecting the significant upside potential of the stock. Goonewardene believes that ivonescimab has a “substantial opportunity” in the lung cancer market, but the total addressable market for the investigational immunotherapy could be even more extensive.
1. Revolution Medicines, Inc. (NASDAQ:RVMD)
Upside Potential: 81.09%
Stock Price as of January 16: $40.55
Number of Hedge Fund Investors: 32
Revolution Medicines, Inc. (NASDAQ:RVMD) is a clinical-stage oncology company developing precision medicines targeting RAS-driven cancers. The company pipeline focuses on therapies that inhibit specific oncogenic proteins associated with difficult-to-treat cancers. Revolution Medicines, Inc.’s (NASDAQ:RVMD) proprietary RAS(ON) platform is designed to selectively target the oncogenic RAS protein state, a key driver in numerous cancers, including pancreatic ductal adenocarcinoma (PDAC) and non-small cell lung cancer (NSCLC).
Revolution Medicines, Inc. (NASDAQ:RVMD) is actively working on the advancement of RMC-6236, a first-in-class RAS(ON) multi-selective inhibitor. The company has made significant strides in demonstrating the efficacy and safety of RMC-6236, particularly in the treatment of metastatic PDAC, a deadly cancer that spreads from the pancreas. Recent data from the Phase 1/2 study showed impressive progression-free survival (PFS) and overall survival (OS) rates, with a median PFS of 8.5 months and a median OS of 14.5 months in patients who had received one prior chemotherapy regimen.
These results have led to the initiation of a global, randomized Phase 3 study, RASolute 302, which is actively recruiting patients. The success of this study could potentially establish RMC-6236 as a new standard of care for second-line treatment in metastatic PDAC, significantly expanding the company’s market reach and therapeutic impact.
Revolution Medicines, Inc. (NASDAQ:RVMD) is also making significant progress in the development of RAS(ON) inhibitors for non-small cell lung cancer (NSCLC). The company is advancing RMC-6236 and RMC-6291, a RAS(ON) G12C selective inhibitor, through various monotherapy and combination studies. The upcoming data disclosures, including updated RMC-6236 monotherapy activity data and initial data from exploratory combination studies, are expected to provide valuable insights into the potential of these therapies. The company aims to initiate a Phase 3 registrational study evaluating RMC-6236 as a monotherapy in previously treated advanced RAS mutant NSCLC in the first quarter of 2025.
While we acknowledge the potential of Revolution Medicines, Inc. (NASDAQ:RVMD) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RVMD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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