It may not be much, but the Russell 2000 Index (RUT) is up 7% in 2024. The index still sits about 20% below the all-time high it reached in November 2021. And with risk-on sentiment in place, investors may be looking for the most undervalued Russell 2000 stocks to buy in April.
The Russell 2000 is frequently referred to as the small-cap index. It does contain some small-cap names, but this index also has many mid-cap and large-cap names. However, market cap is a fluid measurement. The takeaway is that this index focuses on smaller companies which tend to be more volatile, but have significant growth potential.
The Federal Reserve could deliver the index an unwelcome surprise. That’s why investors should ensure these stocks make up only a small percentage of their portfolios. However, for now, the index is trying to break out of a range it has been stuck in for the better part of two years. If that trend continues, you’ll be glad you put some capital towards some of the most undervalued Russell 2000 stocks to buy in April.
Crocs (CROX)
At first glance, Crocs (NASDAQ:CROX) would look like a poor choice as an undervalued stock. CROX is up 62% in the last six months and 48% year-to-date. However, as investors know there’s a difference between a stock’s price and its value.
In the case of Crocs, the company’s valuation is being affected by its acquisition of Heydude which reported 10% lower sales since it was acquired. But there are also reasons to believe there’s more upside to come. For starters, the stock has a forward price-to-earnings (P/E) ratio of just 11.18x. It’s also trading at a 74% discount to the footwear industry.
And the company has an enviable 55% gross margin. That’s impressive in any retail environment and even moreso with inflation dampening earnings outlooks for many retailers. Crocs is forecasting high single-digit earnings growth in 2024.
Analysts currently have a consensus price target of $142.50 on CROX stock. But 10 out of 16 analysts also rate the stock a Strong Buy. The company reports earnings in late April. Any disappointment could lead to a drop in the stock. However, that looks like it would be a buyable dip.
Healthpeak Properties (DOC)
Given the precarious state of the commercial real estate market, Healthpeak Properties (NYSE:DOC) may seem like a curious choice on this list of the most undervalued Russell 2000 stocks to buy in April. The company was, until recently, Physicians Realty Trust. However, the recent merger with Healthpeak has created a new entity.
Healthpeak Properties is a leading owner, operator, and developer of real estate for healthcare discovery and delivery. It’s tenant list includes names such as Novo Nordisk (NYSE:NVO), Pfizer (NYSE:PFE) and Johnson & Johnson (NYSE:JNJ). The company is also well-positioned to support the healthcare industry’s shift to an outpatient model.
After its 38% gain year-to-date, DOC stock is trading in the middle of its 52-week range. Analysts believe the stock can move higher. They have a consensus price target of $20.79 on the stock and nine out of 18 analysts have a Strong Buy rating. Healthcare Properties is projecting mid-single digit growth in earnings and has a forward P/E ratio of around 10x.
Cleveland-Cliffs (CLF)
Steel stocks may look overvalued on concerns that there will be reduced global demand for steel. However, as the tragic collapse of the Francis Scott Key bridge in Baltimore brings to light, infrastructure spending in the country is likely to get a boost. That bodes well for steel demand, and for an undervalued stock like Cleveland-Cliffs (NYSE:CLF).
The company is making news for its attempted bid to buy U.S. Steel (NYSE:X). The latter is a takeover target by Japan’s Nippon Steel. However, the Biden administration has blocked the move and wants to keep U.S. Steel in the hands of an American company.
That being said, the Alliance for Automotive Innovation is petitioning the Biden administration to reject Cleveland-Cliffs bid on the grounds that it would put 65% to 90% of the steel used in building automobiles under the company’s control.
Investors don’t seem to being selling that news. CLF stock is up 30% in the last 12 months and the company is projecting 35% earnings growth in 2024. Yet the stock trades for just 12x forward earnings.
Murphy Oil (MUR)
At the time of this writing, a barrel of oil is trading for above $85 a barrel. Investors who have piled into oil and gas stocks over the past year are being rewarded, and that includes investors in Murphy Oil (NYSE:MUR) which is up about 24% in the last 12 months.
Can the rally last? It appears that it can. Oil prices are expected to climb above $100 a barrel at some point in 2024 and that’s without any stimulus from a possible Fed rate cut. The world simply needs more energy and that’s bullish for an upstream exploration and production company such as Murphy Oil.
On April 4, JPMorgan Chase (NYSE:JPM) reiterated its overweight rating on MUR stock and gave a price target of $52 per share. With the stock trading around $48, it may be due for a slight pullback, but with a dividend that yields 2.48% and pays $1.20 per share annually, investors don’t have to wait for the dip to take a position in the stock.
Arrowhead Pharmaceuticals (ARWR)
I give a hat tip to my InvestorPlace colleague Ian Cooper who put me on to Arrowhead Pharmaceuticals (NASDAQ:ARWR) as one of the most undervalued Russell 2000 stocks to buy in April. He had on his list for March, and I agree with the points he made.
The Russell 2000 is filled with biotechnology companies like Arrowhead. Many are not only unprofitable, they are pre-revenue. Arrowhead fits the former description, but it does have some revenue coming in through its partnerships and collaborations.
The company has developed its TRIM (Targeted RNAi Molecule) technology to combat diseases related to RNAi interference which causes genes to make a dysfunctional protein or too much of a normal protein. The company has 14 candidates in its pipeline at various stages of the clinical trial process. That’s several bites at the apple when it comes to getting a drug approved.
Still, the company may still be years away. But analysts are extremely bullish on ARWR stock with a $55.15 price target which is a 105% upside.
Duolingo (DUOL)
In a society where there’s an app for everything, Duolingo (NASDAQ:DUOL) has caught the attention of individuals who want to learn a second, or third, language. According to the company, its online learning app is “the world’s most popular way to learn languages and the top-grossing app in the Education category on both Google Play and the Apple App Store.”
The company uses scientifically proven techniques and adds the element of gamification to help move users along in their development. And most importantly, it’s accessible for a wide range of users. The company is also integrating the use of generative AI into its platform to enhance the user experience.
Even without AI, the company has been delivering impressive results and that’s reflected in the DUOL stock price which is up 56% in the last 12 months. However, with the company projecting 76% earnings growth in the next year, the stock may still have upside.
A sharp spike in short interest in the last month may put pressure on the stock in the short term. But analysts give DUOL stock a 14% upside from its current price, making it a solid buy-the-dip candidate.
Boyd Gaming (BYD)
Boyd Gaming (NYSE:BYD) is the last of the most undervalued Russell 2000 stocks to buy in April. But it’s no gamble (pun intended). This is a story in two parts. First, the company is one of the largest casino entertainment companies in the Midwest with 29 properties. One of the compelling features of the company’s properties is they are within comfortable driving distance for their customers.
But the company is also a 5% owner of Flutter Entertainment (NYSE:FLUT), the parent company of FanDuel. That gives the company exposure to the fast-growing online sports betting market. And it has its own Stardust Social Casino which gives users an online casino experience.
BYD stock fell sharply in 2023 which is why the stock is only up about 5% in the last 12 months. But now that the comeback is underway, it is likely to gain momentum. Trading for around 10x forward earnings and coming off a strong earnings report, there appears to be a long runway for the stock price.
On the date of publication, Chris Markoch 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.
