Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
The downside that can come from buying these securities is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. Keeping that in mind, here is one small-cap stock that could amplify your portfolio’s returns and two that could be down big.
Two Small-Cap Stocks to Sell:
Funko (FNKO)
Market Cap: $303.8 million
Boasting partnerships with media franchises like Marvel and One Piece, Funko (NASDAQ: FNKO) is a company specializing in creating and distributing licensed pop culture collectibles.
Why Do We Avoid FNKO?
- Lackluster 5.4% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Low free cash flow margin of 2.4% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $5.44 per share, Funko trades at 210.4x forward P/E. If you’re considering FNKO for your portfolio, see our FREE research report to learn more.
AGCO (AGCO)
Market Cap: $8.60 billion
With a history that features both organic growth and acquisitions, AGCO (NYSE: AGCO) designs, manufactures, and sells agricultural machinery and related technology.
Why Do We Steer Clear of AGCO?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 13.9% annually over the last two years
- Earnings per share have contracted by 16.3% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Waning returns on capital imply its previous profit engines are losing steam
AGCO’s stock price of $118.83 implies a valuation ratio of 18.1x forward P/E. Dive into our free research report to see why there are better opportunities than AGCO.
One Small-Cap Stock to Buy:
Upstart (UPST)
Market Cap: $2.75 billion
Using over 2,500 data variables and trained on nearly 82 million repayment events, Upstart (NASDAQ: UPST) is an AI-powered lending platform that uses machine learning to help banks and credit unions more accurately assess borrower risk for personal loans, auto loans, and home equity lines of credit.
Why Should You Buy UPST?
- Loan originations on its platform are soaring as they averaged 56.6% growth over the last year, enabling the company to collect more fees and expand into new markets like credit cards.
- Expected revenue growth of 32.7% for the next year suggests its market share will rise
- Poised to generate positive free cash flow next year, showing the company is at an important crossroads
Upstart is trading at $28.71 per share, or 1.9x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
