Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
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 are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Gap (GAP)
Market Cap: $7.06 billion
Operating under the Gap, Old Navy, Banana Republic, and Athleta brands, Gap (NYSE: GAP) is an apparel and accessories retailer selling casual clothing to men, women, and children.
Why Do We Think Twice About GAP?
- Sales were flat over the last three years, indicating it’s failed to expand its business
- Slow expansion of stores indicates a strategic shift toward maximizing returns from existing locations
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
At $19.79 per share, Gap trades at 8.2x forward P/E. If you’re considering GAP for your portfolio, see our FREE research report to learn more.
The Hanover Insurance Group (THG)
Market Cap: $7.52 billion
Founded in 1852 during a time when fire insurance was crucial for protecting businesses and homes, The Hanover Insurance Group (NYSE: THG) provides property and casualty insurance products through independent agents, serving individuals, small businesses, and mid-sized companies.
Why Does THG Fall Short?
- Sales trends were unexciting over the last two years as its 4.9% annual growth was below the typical insurance company
- 4.2% annualized net premiums earned growth over the last two years lagged behind its insurance peers
- Annual book value per share growth of 3.7% over the last five years was below our standards for the insurance sector
The Hanover Insurance Group is trading at $215.00 per share, or 1.9x forward P/B. Check out our free in-depth research report to learn more about why THG doesn’t pass our bar.
Seadrill (SDRL)
Market Cap: $2.75 billion
Operating in water depths reaching 12,000 feet below the surface, Seadrill (NYSE: SDRL) owns and operates drillships and semi-submersible rigs that drill oil and gas wells in deepwater offshore locations.
Why Do We Avoid SDRL?
- Annual sales declines of 9.6% for the past ten years show its products and services struggled to connect with the market during this cycle
- Costly operations and weak unit economics result in an inferior gross margin of 34.8% that must be offset through higher production volumes
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
Seadrill’s stock price of $43.95 implies a valuation ratio of 26x forward P/E. Read our free research report to see why you should think twice about including SDRL in your portfolio.
Stocks We Like More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is 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% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. 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 (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
