Investors may want to jump into oversold Russell 2000 stocks. For one, after a rough outing in 2023, smaller-cap stocks are starting to come back strong. In fact, since bottoming out around 1,650 in late October, the Russell 2000 index has since rallied to 2,000. From here, it could easily see higher highs, with Goldman Sachs noting that small-cap names could break out above large caps this year.
“The combination of low current valuations and a healthy economic outlook indicates that the Russell 2000 small-cap index should return roughly 9% in the next 6 months and 15% in the next 12 months,” Goldman Sachs analyst Ben Snider told CNBC. “That 15% forecast tops the 7% expected gain for the large-cap S&P 500 that Goldman sees by the end of the year, or 9% when including dividends.”
Here are a few oversold Russell 2000 stocks to get you started.
Amylyx Pharmaceuticals (AMLX)
After slipping from about $25 to less than $12, Amylyx Pharmaceuticals (NASDAQ:AMLX) is showing signs of life again and might test $25 again shortly.
The company just reported that its ALS drug, Relyvrio generated $108.4 million in sales, beating projections for sales of $99.5 million to $106.5 million.
By the second half of the year, the company expects to release Phase 2 results of its Relyvrio treatment for patients with Wolfram syndrome. It’s also in in Phase 3 trials for the progressive supranuclear palsy, and Phase 2 trials to treat Alzheimer’s disease.
Arrowhead Pharmaceuticals (ARWR)
After pulling back from about $40 to $28.53, oversold shares of Arrowhead Pharmaceuticals (NASDAQ:ARWR) are pivoting higher again. While it recently fell after earnings fell short of expectations, keep an eye on the stock.
For one, the company is working with an RNAi mechanism to develop treatments for rare and, or not easily controlled diseases that have resisted treatment. Two, the company’s Targeted RNAi Molecule is helping to accelerate drug discovery, more cost-effectively, as noted by the company’s website.
It’s also working on treatments for hypertriglyceridemia and dyslipidemia, which are related to cholesterol levels in the blood. Even better, Bank of America has a buy rating on the ARWR stock with a price target of $51.
Murphy Oil (MUR)
Another oversold Russell 2000 stock to put on your buy list is Murphy Oil (NYSE:MUR). After dropping from about $48 to about $37, MUR caught double-bottom support and is slowly pivoting higher. I’d like to see it initially test $44.
Better, while we wait for MUR to recover, we can collect its 3.04% yield. It just declared a quarterly cash dividend of 30 cents a share, or $1.20 annualized. That’s payable on March 4 to shareholders of record as of Feb. 20.
According to President and CEO, Roger Jenkins, the company had a successful year of production and execution, generating ample free cash flow for our capital allocation framework. It returned $150 million to shareholders through buybacks and retired $500 million of debt, resulting in a nearly 60 percent decrease in debt since 2020. Its financial stewardship has given it momentum for 2024, starting with a dividend increase.
Vanguard Russell 2000 Index Fund (VTWO)
Or, if you want to hold a basket of Russell 2000 stocks, there’s always an exchange-traded fund like the Vanguard Russell 2000 Index Fund (NASDAQ:VTWO).
Since early November, the VTWO ETF ran from about $65 to about $80. From here, I’d like to see it retest $93 initially. With an expense ratio of 0.1%, the ETF invests in stocks on the index.
Uranium Energy Corp. (UEC)
Let’s also look at Uranium Energy Corp. (NYSEAMERICAN:UEC).
After exploding from about $2.40 to a high of $8.34, the uranium stock just pulled back to $6.51. It’s now technically oversold, which won’t last long because of a troubling supply-demand issue that sent uranium prices to 16-year highs.
About 22 countries, including the U.S., Canada, the UK and France, just pledged to triple their nuclear capacity by 2050 at the 28th Annual UN Climate Change Conference. All of which puts even more pressure on uranium supplies.
DuoLingo (DUOL)
After rallying from a 2023 low of $69 to a high of $245, Duolingo (NASDAQ:DUOL) just pulled back to its 200-day moving average at $177.03. Technically, the mobile learning stock is oversold on RSI, MACD, and Williams’ %R. But I don’t expect that to last long. I’d like to see it rally back to $245 near term.
Helping, earnings have been strong. In its most recent quarter, DUOL posted EPS of six cents, which beat by 18 cents. Revenue of $137.6 million – up 43.2% year over year – beat by $5.47 million. Better, its subscription bookings jumped 54% year over year to $121.3 million. Paid subscribers jumped 60% to 5.8 million. Net income soared to $2.8 million from a year-earlier net loss of $18.4 million. Adjusted EBITDA was $22.5 million from $2.1 million.
Even its outlook is strong. For its fourth quarter, it expects to see revenue of $145 million to $148 million, which is above estimates for $141.27 million. For the full year, it anticipates revenues of $525 million to $528 million, which is above estimates of $515.87 million.
Well positioned, DUOL could test higher highs.
Goodyear Tire & Rubber (GT)
After gapping from about $13.50 to $11.25, Goodyear Tire & Rubber (NASDAQ:GT) is starting to pivot higher from over-extensions on RSI, MACD, and Williams’ %R. From its current price of $12.45, I’d like to see GT refill its bearish gap initially. From there, it could test $15.
The company recently announced a transformation plan that will include selling off three of its assets (its chemical business, the Dunlop Tires brand, and its business of selling tire for mining companies), reducing debt, and cutting costs.
“Goodyear also plans a debt reduction of about $1.5 billion, factoring in about $1.1 billion allocated for restructuring purposes, a move that it estimates will bring its debt close to an investment-grade credit rating,” as noted by Barron’s.
Analysts at HSBC recently initiated a buy rating on the Goodyear Tire, with a price target of $16.80. Deutsche Bank also upgraded Goodyear Tire to a “Buy” rating, believing it’s nearing a turning point.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
