The Russell 2000 is home to many small-cap stocks, offering investors the chance to uncover hidden gems before the broader market catches on. However, these companies often come with higher volatility and risk, as their smaller size makes them more vulnerable to economic downturns.

Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. Keeping that in mind, here is one Russell 2000 stock that could be the next big thing and two best left off your watchlist.

Two Stocks to Sell:

Fresh Del Monte Produce (FDP)

Market Cap: $1.43 billion

Translating to "of the mountain" in Spanish, Fresh Del Monte (NYSE:FDP) is a leader in providing high-quality, sustainably grown fresh fruits and vegetables.

Why Should You Sell FDP?

1. Flat sales over the last three years suggest it must innovate and find new ways to grow
2. Gross margin of 8.3% is below its competitors, leaving less money to invest in areas like marketing and production facilities
3. Low returns on capital reflect management’s struggle to allocate funds effectively

At $30.13 per share, Fresh Del Monte Produce trades at 10.5x forward price-to-earnings. To fully understand why you should be careful with FDP, check out our full research report (it’s free).

AMN Healthcare Services (AMN)

Market Cap: $754.1 million

With a network of thousands of healthcare professionals ranging from nurses to physicians to executives, AMN Healthcare (NYSE:AMN) provides healthcare workforce solutions including temporary staffing, permanent placement, and technology platforms for hospitals and healthcare facilities across the United States.

Why Do We Think AMN Will Underperform?

1. Declining travelers on assignment over the past two years imply it may need to invest in improvements to get back on track
2. Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

AMN Healthcare Services is trading at $20.12 per share, or 12.9x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than AMN.

One Stock to Watch:

Watts Water Technologies (WTS)

Market Cap: $6.09 billion

Founded in 1874, Watts Water (NYSE:WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.

Why Do We Like WTS?

1. Superior product capabilities and pricing power lead to a premier gross margin of 44.7%
2. Operating margin improvement of 5.3 percentage points over the last five years demonstrates its ability to scale efficiently
3. Share repurchases over the last five years enabled its annual earnings per share growth of 16.8% to outpace its revenue gains

Watts Water Technologies’s stock price of $189.05 implies a valuation ratio of 20.4x forward price-to-earnings. Is now the time to initiate a position? Find out in our full research report, it’s free.

Stocks We Like Even More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.