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The Russell 2000 is ending the year on a strong note. As of Dec. 18, the small cap index is up about 11% for the year. That can make investors hesitant to chase these stocks higher, but small caps may still offer attractive opportunities heading into the new year.
For starters, many analysts believe that 2026 will be a strong year for small-cap stocks. Much of this is due to investors looking for opportunities outside of the overvalued tech trade, particularly the Magnificent 7 stocks that have carried the market to new heights. Small-cap stocks are expected to be a beneficiary of this rotation.
Many of these small caps have been beaten down, but that’s where opportunistic investors can find the best opportunities. Here are five names for investors to consider.
Gorman-Rupp: A Dividend King With Industrial Upside
The Gorman-Rupp Co. is a small-cap play in the industrial sector.
The company specializes in the design, production, and distribution of pumps and pumping systems across a variety of commercial applications.
GRC stock is up about 29% in 2025 as it has been showing steady year-over-year (YOY) revenue and earnings growth. That’s expected to accelerate in 2026, with analysts forecasting 13.6% earnings growth in the next 12 months.
The consensus price target for GRC stock suggests investors could see 19% upside in the next 12 months. That goes along with a modest dividend. The yield of 1.57% isn’t particularly exciting, but Gorman-Rupp is part of the exclusive group of Dividend Kings as it has increased its dividend for 52 consecutive years.
Ultra Clean: A Beaten-Down Semiconductor Supplier Poised for a Rebound
Ultra Clean Holdings Inc. supplies critical consumables and process tools for the semiconductor manufacturing industry.
In that way, it provides the picks and shovels for a "picks-and-shovels" industry.
UCTT stock is down over 29% in 2025. Much of that has to do with weaker-than-expected revenue and earnings. However, the stock is up about 12% in the 30 days ending Dec. 18 and the consensus price target of $33.33 gives Ultra Clean stock about 30% projected upside.
That may be underselling the opportunity. Analysts are forecasting 98% earnings growth in the next 12 months. That suggests that the super cycle in the semiconductor sector is far from over, which adds to the bull case for UCTT stock.
Select Water Solutions: A Permian Basin Water Play With Structural Tailwinds
Select Water Solutions Inc. is a water management provider at a time when water management is becoming big business.
However, the specific opportunity with WTTR stock may come from its niche role as a provider for the oil and gas industry, specifically in the all-important Permian Basin.
This is a sector that will benefit from a structural demand shift toward full-scale water midstream solutions. Rising capital expenditure (CapEx) spending will improve the revenue and earnings growth for Select Water Solutions.
WTTR stock is down 20.7% year-to-date (YTD). However, over the last five years, investors are still up nearly 150%. Analysts are forecasting strong YOY earnings growth of more than 25% and, with a consensus price target of $14, a nearly 30% increase in the company’s stock price.
Evolv Technologies: AI-Driven Security Meets Recurring Revenue Growth
Evolv Technologies Inc. is a security technology company that develops and markets AI-driven screening solutions.
Its signature product, Evolv Express, integrates seamlessly into existing security checkpoints. This allows a frictionless experience for guests who can move through checkpoints without stopping, emptying their pockets, removing shoes, etc.
EVLV stock is up more than 80% in 2025, and analysts are forecasting 24% additional upside. A key driver of next year’s growth is the company’s shift in business model.
Specifically, Evolv is moving away from its distributor-based model and moving toward direct fulfillment. This is expected to help increase the company’s annual recurring revenue (ARR), which is already growing at a strong rate of 25%.
Wolverine World Wide: A Consumer Discretionary Turnaround Story
Wolverine World Wide Inc. is a footwear manufacturer in the beaten-down consumer discretionary sector.
It is the parent company of brands such as Merrell, Saucony, Hush Puppies, and Keds.
Wolverine was recently named Company of the Year by Footwear News.
This was largely due to the strength of its Saucony brand, which focuses on performance-driven runners.
The stock is down about 14% YTD, but up over 21% in the last 30 days.
At one point this summer, WWW stock was trading around three-year highs. Analysts believe there’s still 23% upside for the stock, which is supported by around 29% earnings growth.