If You Can Only Buy One Russell 2000 Stock in May, It Better Be One of These 3 Names
The Russell 2000 could be on the cusp of a major surge, building a considerable head of steam since January. While the S&P 500’s robust gains have outpaced the Russell 2000 over the past year, the gap has started to close recently, sparking renewed enthusiasm for Russell 2000 stocks.
Much of it is linked to a likely ease in monetary policy, marked by potential rate cuts later this year. Small-cap companies may finally catch a breakthrough rate cut or a stable interest rate environment. With growth capital becoming more affordable, we could see a historic rally among undervalued players in the Russell 2000.
Moreover, analysts expect the market to be much broader following the AI-led market rally last year. It’s also imperative to consider that multiple stocks have leaped from the index, transforming some Russell 2000 stocks into stunning multi-baggers along their journey.
Valley National Bancorp (VLY)
Valley National Bancorp (NASDAQ:VLY) is one of the most attractive value plays in the U.S. regional banking space. Year-to-date (YTD), VLY stock has shed a sizeable 32%, trading at just two times forward sales estimates. VLY stock has lost a lot of value due to the sector-wide turbulence, but recent results have shown that those concerns are overblown.
The bank continues to maintain a stable deposit base, avoiding significant withdrawals while effectively managing its interest rates. Moreover, to protect itself from the downside risks associated with its commercial real estate (CRE) business, the bank added $22 million in reserves during the first quarter (Q1) alone.
Furthermore, it’s proactively diversifying its loan portfolio beyond commercial real estate to focus more on its growing business and industrial loans segment. This diversification will likely reduce stock price volatility while capitalizing on wider economic growth, positioning VLY for future stability and profitability.
Given its encouraging performance and repressed stock price, VLY stock offers more than a 22% upside from current prices.
Magnite (MGNI)
Magnite (NASDAQ:MGNI) is a popular sell-side advertising platform that has grown its top-line by more than 30% in the past five years. Its robust platform offers publishers and digital media owners a one-stop shop to manage, sell and optimize their ad spaces. It essentially automates the selling process for its users, helping them maximize their ad revenue.
Recent results have been excellent, with Magnite comfortably surpassing top-and-bottom-line estimates in the past five consecutive quarters. Moreover, its net losses have narrowed by more than 50% to $78.2 million on a trailing twelve-month (TTM) basis compared to last year.
It recently released its (Q1) results, which again blew past analyst estimates across both lines. Revenues were up to 149.3 million, a 15% increase on a year-over-year (YOY) basis, beating estimates by $25.1 million. Moreover, its non-GAAP EPS of five cents outpacing expectations by a cool five cents. Perhaps one of the brightest spots in its Q1 report was its exclusive partnership with Netflix (NASDAQ:NFLX), which could potentially add millions in incremental sales in the upcoming quarter.
Duolingo (DUOL)
Duolingo (NASDAQ:DUOL) is the most popular app for learning languages, with more than 40 options. In recent years, it has smartly expanded into new areas, such as math and music, to diversify its offerings. Though it’s not the flashiest of stocks, it certainly packs a punch, making massive strides in the edTech realm.
Its fundamentals are a peach, with more than 40% growth since the second quarter (Q2) of 2022. Moreover, it has beaten analyst estimates across both lines for the past 11 consecutive quarters, an incredible feat, to say the least. In its most recent quarterly report, it delivered a 45% jump in sales to $167.5 million while beating estimates by $1.9 million.
More impressively, it delivered $27 million in profits, shifting from a $2.6 million net loss. Engagement numbers remain excellent, boasting 31.4 million daily active users and 97.6 million monthly active users, representing 54% and 35% YOY growth, respectively. Hence, there’s a lot to like about DOUL stock, especially after its 20% YTD tumble.
On the date of publication, Muslim Farooque 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
