3 Quality Small Caps Available at a Discount Amid Russell 2000 Correction
As the stock market consolidates 2024 gains, small caps have yet to catch up, prompting speculation about potential entry points amid the recent drop.
Russell 2000 has posted marginal gains since the year's start, but historically, small caps often lead market rallies.
In this piece, we will discuss three small-cap stocks you can add to your portfolio as the Russell 2000 index corrects.
The stock markets kicked off 2024 with robust gains, but one area is trailing behind: small caps. While the S&P 500 surged by about 8%, small-cap stocks have faced several sell-offs, including one witnessed yesterday. Amid the recent correction, investors are already eyeing potential entry points into the small-cap sector.
The Russell 2000 has only inched up 0.3% since the year began. However, over the past five years, the index has seen a respectable 31.5% increase. Historically, the start of a broad market rally is often led by small-cap stocks.
But will this pattern repeat in 2024? That hinges on several factors. Firstly, the economy must steer clear of a recession. Additionally, the timing of the US Federal Reserve's interest rate cuts is crucial. Currently, markets anticipate the first rate cut no earlier than June. Many small caps are still focused on growth and would benefit from lower borrowing costs.
Another key consideration for investors is company valuations. As of March 8, 2024, the price-earnings ratio (P/E ratio) of the Russell 2000 index stands at 27.89. For those eyeing small-cap growth stocks, targeted research is advisable.
To aid in this search, we've utilized InvestingPro's screener to pinpoint healthy small-cap stocks with growth potential. Three stocks have emerged as standout candidates, meeting both InvestingPro's
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