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4 Small Cap Stocks You Should Steer Clear of This Year
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Most of the stocks ended 2016 in green, thanks to the post-election rally. While the year began on a sour note given several concerns plaguing the markets, the rally in the last two months mitigated losses to a great extent.
The small-cap companies, whose financial performance is primarily tied with the domestic economy, were one of the biggest winners in 2016. During the year, the Russell 2000 (index of small and mid-sized U.S. companies) soared 22.4% compared with the S&P 500’s gain of 11.2%.
A majority of the gain in the Russell 2000 index was in the last two months, driven by the U.S. Presidential election results and the Fed rate hike, which indicates strong domestic economy. With Donald Trump elected as the next President, certain potential financial policy changes are expected to aid several small-cap companies.
The economic growth is likely to further strengthen as the Trump-administration promises to mainly focus on domestic economy, lower tax rates and enhance infrastructure spending. This should significantly support small-cap stocks, as they are less susceptible to global concerns.
However, there are several small-cap companies that may fail to capitalize on the favorable trends. There could be many reasons for such performance including increased competition, weak fundamentals and slowdown in the sector fundamentals.
Therefore, you should be careful about riding the small-cap rally. Before betting on small-cap stocks, you should check their fundamental strengths and weaknesses.
Stocks to Avoid
While it is a difficult task to choose small-cap stocks that are likely to disappoint in 2017, we have taken the help of the Zacks Stock Screener to easily select such stocks.
We have shortlisted stocks with a market capitalization of $1.5 billion or less and a VGM Score of D or F. Further, these stocks carry a Zacks Rank #4 (Sell) or #5 (Strong Sell).
To further cut short the list, we choose stocks that lost 15% or more over the last 52 weeks. In addition, these stocks witnessed 10% or more downward revision in 2017 earnings estimates over the last four weeks.
Lands' End, Inc. (LE - Free Report) : Shares of this Dodgeville, WI-based company declined 29.6% over the last 52 weeks. The company has a market cap of $544 million and has witnessed 46.6% downward revision in 2017 earnings estimates, over the last four weeks. Additionally, the stock carries a Zacks Rank #4 and has a VGM Score of F.
Vera Bradley, Inc. (VRA - Free Report) : This stock has plunged 23.5% over the last 52 weeks. Based in Roanoke, IN, the company, with a market cap of $434 million, witnessed 33.3% downward revision in 2017 earnings estimates, over the last four weeks. Further, the stock has a Zacks Rank #4 and a VGM Score of D.
Restoration Hardware Holdings, Inc. (RH - Free Report) : This Corte Madera, CA -based company lost 58% over the last 52 weeks. With a market cap of $1.2 billion, it witnessed 15.3% downward revision in 2017 earnings estimates, over the last four weeks. Also, the stock has a Zacks Rank #4 and a VGM Score of F.
Guess', Inc. (GES - Free Report) : Shares of this Los Angeles, CA-based company tumbled 34.1% over the last 52 weeks. The company has a market cap of $1 billion and has witnessed 13.8% downward revision in 2017 earnings estimates, over the last four weeks. Moreover, the stock carries a Zacks Rank #4 and has a VGM Score of F.
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>
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4 Small Cap Stocks You Should Steer Clear of This Year
Most of the stocks ended 2016 in green, thanks to the post-election rally. While the year began on a sour note given several concerns plaguing the markets, the rally in the last two months mitigated losses to a great extent.
The small-cap companies, whose financial performance is primarily tied with the domestic economy, were one of the biggest winners in 2016. During the year, the Russell 2000 (index of small and mid-sized U.S. companies) soared 22.4% compared with the S&P 500’s gain of 11.2%.
A majority of the gain in the Russell 2000 index was in the last two months, driven by the U.S. Presidential election results and the Fed rate hike, which indicates strong domestic economy. With Donald Trump elected as the next President, certain potential financial policy changes are expected to aid several small-cap companies.
The economic growth is likely to further strengthen as the Trump-administration promises to mainly focus on domestic economy, lower tax rates and enhance infrastructure spending. This should significantly support small-cap stocks, as they are less susceptible to global concerns.
However, there are several small-cap companies that may fail to capitalize on the favorable trends. There could be many reasons for such performance including increased competition, weak fundamentals and slowdown in the sector fundamentals.
Therefore, you should be careful about riding the small-cap rally. Before betting on small-cap stocks, you should check their fundamental strengths and weaknesses.
Stocks to Avoid
While it is a difficult task to choose small-cap stocks that are likely to disappoint in 2017, we have taken the help of the Zacks Stock Screener to easily select such stocks.
We have shortlisted stocks with a market capitalization of $1.5 billion or less and a VGM Score of D or F. Further, these stocks carry a Zacks Rank #4 (Sell) or #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
To further cut short the list, we choose stocks that lost 15% or more over the last 52 weeks. In addition, these stocks witnessed 10% or more downward revision in 2017 earnings estimates over the last four weeks.
Lands' End, Inc. (LE - Free Report) : Shares of this Dodgeville, WI-based company declined 29.6% over the last 52 weeks. The company has a market cap of $544 million and has witnessed 46.6% downward revision in 2017 earnings estimates, over the last four weeks. Additionally, the stock carries a Zacks Rank #4 and has a VGM Score of F.
LANDS END INC Price
LANDS END INC Price | LANDS END INC Quote
Vera Bradley, Inc. (VRA - Free Report) : This stock has plunged 23.5% over the last 52 weeks. Based in Roanoke, IN, the company, with a market cap of $434 million, witnessed 33.3% downward revision in 2017 earnings estimates, over the last four weeks. Further, the stock has a Zacks Rank #4 and a VGM Score of D.
VERA BRADLEY Price
VERA BRADLEY Price | VERA BRADLEY Quote
Restoration Hardware Holdings, Inc. (RH - Free Report) : This Corte Madera, CA -based company lost 58% over the last 52 weeks. With a market cap of $1.2 billion, it witnessed 15.3% downward revision in 2017 earnings estimates, over the last four weeks. Also, the stock has a Zacks Rank #4 and a VGM Score of F.
RESTORATION HDW Price
RESTORATION HDW Price | RESTORATION HDW Quote
Guess', Inc. (GES - Free Report) : Shares of this Los Angeles, CA-based company tumbled 34.1% over the last 52 weeks. The company has a market cap of $1 billion and has witnessed 13.8% downward revision in 2017 earnings estimates, over the last four weeks. Moreover, the stock carries a Zacks Rank #4 and has a VGM Score of F.
GUESS INC Price
GUESS INC Price | GUESS INC Quote
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>