After a November rally, December is off to a slow start. With earnings season winding down and investors engaging in tax-loss harvesting and profit-taking, the next opportunity for stocks will likely be a January effect. But will that rally broaden out to include Russell 2000 stocks? Certainly, that would be welcome news to many small-cap investors.
The Russell 2000 focuses on smaller companies. Typically, this means that there is a level of volatility with these stocks. Historically, small-cap stocks lead market rallies. With this in mind, they are likely to be where the most significant growth will come from if the market rally expands in 2024.
Investing in Russell 2000 stocks is not for investors with a low-risk tolerance. In fact, it’s best if these stocks only make up a small portion of your portfolio. But if you have an appetite for risk, here are three Russell 2000 stocks that are outperforming the market now — and look primed to do so in the future.
Holley (HLLY)
Many Russell 2000 stocks include under-the-radar companies, and Holley (NYSE:HLLY) fits that description. The company manufactures and distributes high-performance autoparts for car and truck enthusiasts. To be clear: this is not your weekend do-it-yourself market. It’s a company that’s in touch with an audience that is looking to get the most from their modern or classic cars.
The stock is up 98% in 2023, and there are strong fundamentals that back that growth up. The company just recorded its third consecutive profitable quarter. Also in that quarter, the company reported strong year-over-year growth in net sales, gross margin, adjusted EBITDA, and free cash flow.
Holley has a $500 million market cap as of this writing. This is a small company, and the price movement is likely to be volatile. But if you have an appetite for risk, HLLY stock may be a nice fit. For those that place stock in such things, the company’s CEO recently purchased 25,000 shares of HLLY stock bringing his total stake in the company to 2%.
Wingstop (WING)
In a year when many restaurant stocks are facing difficult comps to 2022, Wingstop (NASDAQ:WING) stands out. In its most recent quarter, Wingstop beat revenue and earnings on the top and bottom lines. Not surprisingly, WING stock is up 18% in the month since that earnings report.
The numbers were even more impressive on a year-over-year basis. Revenue was up 26% compared to the same period in 2022, and earnings were up even more at approximately 60%. The company also continues to deliver year-over-year same-store sales growth.
With that said, WING stock is up 78% in 2023. Now around $244, the stock is trading above the consensus price target of 17 analysts that have issued a price target in the last three months.
Analysts are expecting growth to come from international markets. That will take time to be reflected in the company’s numbers. That means it wouldn’t be unheard of for WING stock to experience a sharp pullback, but that looks like a buyable dip.
Uranium Energy (UEC)
The clean energy revolution is facing the harsh realities of global macroeconomics. Many clean energy stocks have significantly underperformed the market in 2023. Luckily, Uranium Energy (NYSEAMERICAN:UEC) is a notable exception. UEC stock is up 73% in 2023 including 13% in the 30 days ending December 4, 2023.
The catalyst is a spike in the spot price of uranium. At $81 per pound as of this writing, uranium is valued at levels that investors haven’t seen since 2008. The shift to clean energy is beginning to include nuclear energy. And this is creating a supply-demand imbalance which is bullish for prices to go higher.
Fundamentally, Uranium Energy has no debt, but it also has yet to mine for any uranium. Prior to uranium’s recent surge, uranium prices were stagnant which made it inefficient to mine. If uranium prices stabilize, that dynamic will change and Uranium Energy would be a beneficiary. As evidence of that, the company recently entered a memorandum of understanding (MOU) with Wyoming-based TerraPower to supply uranium to the company’s first-of-its-kind Natrium reactor and energy storage system.
UEC stock is trading at its highest level since 2011. The consensus price target of analysts only suggests a 5% increase in the stock price. However, the long-term outlook for uranium makes the stock one of the Russell 2000 stocks to watch closely.
On the date of publication, Chris Markoch 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.
