While most of the focus of our research is on Large Cap companies, typically in the S&P 500 or Russell 1000 indices, our research has a very good track record for identifying winners and losers in the small cap Russell 2000 index as well. In one of our posts from March of 2014 we recommended reducing exposure to small cap equities as they had reached bubble-level valuation ranges. Only twice in the previous 20 years had the Russell 2000 looked so overvalued. During our recommended moratorium on small caps (March 2014 to March 2016) the Russell 2000 index delivered -9.57% returns. Since then, the Russell 2000 finally has moved back into normal valuation territory and we issued an article on March 25, 2016 ending our market call of reducing exposure to small cap stocks. Small Caps have enjoyed a nice rally since, delivering over 7% returns since our call to get back into the small cap space.
Since the small caps have been performing so well of late and are still trading at a normal valuation level, we have decided to provide another list of attractive small-cap equities for those looking to add positions in the space. These companies all earn an Investment Grade of A and have attractive valuations. By using AFG’s Investment Grade, back-tests show that a strategy of buying A & B graded companies while avoiding D & F grade companies’ investors can put themselves in a better starting point to outperform. The companies below have been graded on Valuation, Quality and Momentum factors and all have several characteristics inherent in companies likely to outperform.
20 Attractive Small Cap Stocks – Russell 2000
| Ticker | Name | Sector | Investment Grade |
| TSE | TRINSEO S.A. | Basic Material | A |
| CBPX | CONTINENTAL BUILDING PRODUCTS, | Capital Goods | A |
| KLXI | KLX INC | Consumer Durable | A |
| WNC | WABASH NATIONAL CORPORATION | Consumer Durable | A |
| DF | DEAN FOODS CO. | Consumer Non Durable | A |
| OME | OMEGA PROTEIN CORPORATION | Consumer Non Durable | A |
| UNFI | UNITED NATURAL FOODS, INC. | Consumer Non Durable | A |
| CZR | CAESARS ENTERTAINMENT CORP | Consumer Services | A |
| CMPR | CIMPRESS NV | Consumer Services | A |
| PLNT | PLANET FITNESS INC | Consumer Services | A |
| NGHC | NATIONAL GENERAL HOLDINGS CORP | Financials | A |
| INCR | INC RESEARCH HOLDINGS INC | Miscellaneous | A |
| PRAH | PRA HEALTH SCIENCES INC | Miscellaneous | A |
| SNX | SYNNEX CORP | Miscellaneous | A |
| CRUS | CIRRUS LOGIC INC | Technology | A |
| NTGR | NETGEAR, INC. | Technology | A |
| PLCM | POLYCOM, INC. | Technology | A |
| QLGC | QLOGIC CORPORATION | Technology | A |
| FRO | FRONTLINE LIMITED | Transportation | A |
| SFL | SHIP FINANCE INTERNATIONAL LTD | Transportation | A |
