3 Small-Cap Stocks to Buy as the Russell 2000 Extends Its Rally

NOT buy any SpaceX IPO shares until you read THIS (From Weiss Ratings)

The Russell 2000 index, which is frequently seen as a proxy for small-cap stocks, is up more than 8% in the 30 days ending May 8. That’s a continuation of a trend that’s been in place over the last year. Over the past 12 months, the index is up over 40%.

The good news for investors is that there's likely to be more upside ahead. Many of these stocks are trading at a discount to the S&P 500 based on their price-to-earnings (P/E) ratio as well as their individual sectors. This valuation gap has historically served as a tailwind for small-cap outperformance, particularly during periods of economic expansion and falling interest rates. With the Federal Reserve signaling a more accommodative stance, the conditions may set up for another leg higher in small-cap equities.

That said, sometimes stocks are cheap for a reason. However, each of the stocks on this list has been carefully selected and has potential catalysts that give investors reason to believe in their long-term upside. Here are three small-cap names worth watching.

A Niche Retailer With Room to Run

Academy Sports and Outdoors (NASDAQ: ASO) occupies a specialty niche in the sporting goods and outdoor gear space. ASO has made a strong rally from the 52-week low it hit when the Trump administration announced its Liberation Day tariffs.

The stock is up 35% in the 12 months ending May 8. That’s not without reason. The company has managed to deliver slight year-over-year growth in revenue and earnings, unlike many consumer discretionary stocks.

Despite that growth, ASO still has a forward P/E ratio of around 9x, which is a substantial discount to the S&P 500, but a premium to the company’s historic average.

ASO is now approximately 7% below its consensus price target of $58.57, and the consensus rating on the stock is a Hold. And in its Q4 2025 earnings report, the company warned that consumer weakness and tariff impacts could mean earnings will come in at the lower end of its guidance.

Investors will have to wait until June 9 for the company’s next report. It could be revealing, particularly if the cracks that are starting to show in the consumer begin to widen. Prior to the company’s report, investors will get another round of inflation and jobs data.

A Dividend-Growing Apparel Play With Loyal Customers

Buckle Inc. (NYSE: BKE) has been one of the best-performing retail stocks in the past 12 months. BKE is up more than 40% in that time. The apparel and footwear company’s blend of contemporary style with everyday comfort has lifted both revenue and earnings in the last 12 months.

At 13x earnings, the stock is attractively valued compared to the broadline retail sector. However, as of this writing, BKE is trading very close to its consensus price target of $53. It’s worth noting that MarketBeat shows only two analysts covering the stock.

Buckle is another stock that will reflect the state of the consumer. Some early earnings reports suggest pressure on lower-income consumers, but that's not necessarily Buckle’s target audience.

One soft spot in the company’s Q4 2026 earnings report was elevated inventory. However, management noted that this was done on the expectation of increased denim demand. Investors will see how that plays out on May 22 when the company reports earnings.

Of particular interest to some investors is the company’s dividend, which has increased at an average annual rate of around 11% in the last five years. Plus, in 2024 and 2025, the company has issued a special dividend to shareholders.

A Small-Cap Industrial Poised for a Second-Half Surge

Industrials have been a strong sector as demand for data centers and broader infrastructure upgrades plays out. One name to consider would be Core Molding Technologies (NYSEAMERICAN: CMT). The company has a market cap of just over $230 million as of this writing. But CMT has packed a nice punch for investors in the last 12 months, climbing over 70%.

The company reported its Q1 2026 earnings report on May 7, and the stock fell on concerns about truck-cycle softness and the impact on free cash flow as it expands its investments in Mexico. However, those plans are ahead of schedule.

That’s where investors may have a positive setup. The post-earnings dip could have been expected after such a strong rally. But if the company’s forecasts for year-over-year revenue and earnings acceleration into the second half of the year are right, this could be a time for investors to accumulate on the dip.

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