One of many stock market indexes used to measure performance, the Russell 2000 is composed of 2,000 small-cap companies that make up the bottom two-thirds of the Russell 3000 index. The reason is that the top 1,000 stocks in the Russell 3000 make up 93% of the index’s market cap, so focusing on the lower 2,000 allows analysts and investors to judge the movement of the small-cap market more accurately.
It is an excellent way to gauge the performance of smaller economic sectors while also finding stocks to buy and sell. Moreover, the industry breakdown of the Russell 2000 has healthcare and technology at a combined 29% of the index, which means it is subject to the general volatility of those industries. That said, due to their small-cap nature, knowing which Russell 2000 stocks to sell is imperative to maximizing profits from a position before it fizzles out.
AADI Bioscience (AADI)
Tackling an incredibly complex and serious group of genetic disorders, AADI Biosciences (NASDAQ:AADI) has something of an uphill battle ahead of it. The company’s drug pipeline focuses on treating cancers that occur due to malfunctions in what is called the mTOR signaling pathway. That’s significant because the mTOR pathway serves as a regulator in metabolic and physiological processes like building muscle or repairing damaged cells.
However, when overactive it can lead to cancer, diabetes and even depression — depending on additional factors. Thus, many of AADI’s current drugs and drug pipelines focus on inhibiting this pathway to treat the aforementioned diseases. Unfortunately, despite one successful drug reaching the market and another entering regulatory trials by year’s end, the company has struggled to garner investor interest and has lost 31% of its value year-to-date.
As such, investors may want to sell now before another quarter of losses posted by its earnings report and wait to buy back in at a lower price depending on the progress of its next regulatory trials.
Applied Optoelectronics (AAOI)
With the gold rush of artificial intelligence data centers and computer processing networks, one would think that a company specializing in selling access networking technology would prosper. Yet, that hasn’t been the story so far for Applied Optoelectronics (NASDAQ:AAOI) in 2024. Despite the company’s varied product applications for the telecom and data center industry, it has lost 56% of its value year-to-date.
Moreover, the company is now trading at a third of its 52-week price high and is still reeling from its disappointing first-quarter earnings report. With revenue down by 23% year-over-year (YOY), the company’s net losses amounted to $23 million in Q1 2024. While some of this can be chalked up to research and development, major increases in sales and marketing costs paired with a significant dip in its community antenna television sales hurt the company’s long-term momentum.
Having only been in the Russell 2000 since June 11, 2024, the company has a ways to go but is still one of the index’s worst performers for the year.
Southern California Bancorp (BCAL)
A regional banking company that has struggled to retain income over the years, Southern California Bancorp (NASDAQ:BCAL) has performed quite poorly year-to-date. For the first quarter of 2024, the company’s revenue sank 15.32% YOY. This put it at only $22.24 million for the quarter, lower than three out of the four prior quarters.
Even more concerning, the bank’s net income dropped 40% YOY, bringing it to $4.94 million. When investing in bank stocks, the bank’s cash flow and liquidity are key to its prospects of generating returns and further investor interest. Without these catalyzing factors, BCAL stock will likely continue to wither as it lacks the capital needed to make substantial investing decisions.
Thus, with this downtrend — likely due to the economic and quality of life struggles in Southern California — BCAL stock is among the most important Russell 2000 stocks to sell.
On the date of publication, Viktor Zarev 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
