Five 2026 Small-Cap Stocks No One Is Talking About (Yet)

Key Concepts

• Sector Rotation: The shifting of investment capital from one industry sector to another, driven by economic cycles and investor expectations.
• Russell 2000: A small-cap stock market index representing approximately 2,000 of the smallest companies in the Russell 3000 Index.
• MAG 7: Refers to the seven largest technology companies (likely Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta) that have driven significant market gains.
• Earnings Growth: The rate at which a company's profits increase over a specific period.
• Capex Spending: Capital expenditures – funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, and equipment.
• Analyst Sentiment: The overall attitude or opinion of financial analysts regarding a particular stock or market.

Small Cap Stock Outlook for 2026: A Detailed Analysis

The video focuses on the potential for a sector rotation into small-cap stocks, particularly as money potentially moves out of large-cap technology stocks (the “MAG 7”) in 2026. The analysis highlights five small-cap stocks identified using a specific screening methodology, and discusses the factors driving their potential growth.

1. The Macroeconomic Context & Sector Rotation

The core argument presented is that the Russell 2000 index is showing strength, currently up 11.6% as of late 2025, with a year-to-date gain of 6%. This strength is attributed to a potential shift in investor capital away from the heavily invested-in AI infrastructure stocks (the MAG 7) and into small-cap companies. The expectation is that revenue will flow into the small-cap sector in the coming year. This aligns with the concept of sector rotation, where investors move funds between different sectors based on anticipated economic conditions.

2. Stock Screening Methodology

Chris Marotch utilized the MarketBeat stock screener to identify promising small-cap stocks. The key criteria were:

• Small-Cap Designation: Focusing on companies with smaller market capitalizations.
• Positive Analyst Sentiment: Identifying stocks with favorable ratings and outlooks from financial analysts.
• Minimum 10% Earnings Growth: Selecting stocks projected to experience at least 10% earnings growth in the next year, considered significantly above average (mid to high single-digit growth is typically considered good).

3. Five Small-Cap Stocks to Watch in 2026

The following five stocks were identified as having strong potential:

a) Gorman-Rupp (GRC):

• Industry: Pumps and infrastructure equipment.
• Rationale: A “non-sexy” but essential company serving diverse industries. Demand is expected to increase due to ongoing infrastructure projects in the US, outside of AI-related infrastructure.
• Projected Growth: Analysts project a nearly 20% increase in stock value in the next year.
• Catalyst: Regulations from a significant legislative bill (referred to as the “big beautiful bill”) are expected to kick in during 2026, driving increased capital expenditure (capex) spending and benefiting companies like Gorman-Rupp.
• Recent Performance: Experienced a weaker year in 2025, setting the stage for potential growth.

b) Ultra Clean (UCLN):

• Industry: Semiconductor cleaning equipment.
• Rationale: Provides essential cleaning technology for semiconductor manufacturing, acting as the “picks and shovels” for the semiconductor industry.
• Projected Growth: Despite being down 16% year-to-date, strong earnings growth is anticipated in the coming year.
• Catalyst: A shift in the chip demand cycle is expected in 2026, with chipmakers increasing demand, benefiting Ultra Clean. The video suggests that bullish analyst sentiment contradicts concerns about a weakening AI demand.
• Competitive Landscape: Faces competition, but maintains long-term contracts with its clients.

c) Select Water Solutions (SWWR):

• Industry: Water treatment and solutions, specifically for the oil and gas industry.
• Rationale: Provides essential water treatment services for oil and gas operations, regardless of oil price fluctuations. The company has a strong presence in the Permian Basin.
• Projected Growth: Analysts predict a 19% upside for the stock in the next year, driven by recurring revenue.
• Recent Performance: Down over 20% year-to-date, presenting a potential buying opportunity.
• Catalyst: Continued oil and gas production will sustain demand for its services.

d) Evolve Technologies (EVV):

• Industry: Metal detection and security screening.
• Rationale: Provides advanced metal detection technology for schools, churches, and major venues, offering a non-intrusive security solution. Utilizes AI in its technology.
• Projected Growth: The stock is already up significantly (75-76%) in 2025, and further growth is expected.
• Catalyst: A shift in the company’s business model from selling through distributors to direct sales is expected to accelerate revenue recognition and profitability.
• Bridget’s Pick: The host, Bridget, identified this as her “buy pick” due to the strong demand and long-term contracts.

e) Wolverine Worldwide (WWW):

• Industry: Footwear (brands include Maxel, Sakonei, Hush Puppies, Keds).
• Rationale: Benefits from consumer spending and potential tax benefits from the “big beautiful bill” expected to kick in during 2026.
• Projected Growth: Analysts anticipate over 10% earnings growth.
• Catalyst: A stronger consumer driven by economic stimulus.
• Recent Performance: Down in 2025, but previously reached a three-year high.

4. Key Arguments and Perspectives

The central argument is that the small-cap sector presents a compelling investment opportunity in 2026, driven by a potential sector rotation and favorable economic conditions. The video emphasizes identifying companies with strong earnings growth potential and positive analyst sentiment, even if they have underperformed in the current year. The focus on companies that haven’t already “run up” suggests a contrarian investment approach.

Notable Quote: “I think that’s actually one of the advantages in the small cap sector right now is you’re going to find a lot of stocks that didn’t necessarily perform well in 2025, but that’s where the opportunity is for investors who have the risk tolerance to to to look at that.” – Chris Marotch

5. Data and Statistics

• Russell 2000 Performance: Up 11.6% as of late 2025, with a year-to-date gain of 6%.
• Earnings Growth Threshold: Stocks were screened for a minimum of 10% projected earnings growth in the next year.
• Stock Performance (YTD):
  • Ultra Clean: Down 16%
  • Select Water Solutions: Down over 20%
  • Evolve Technologies: Up 75-76%
  • Wolverine Worldwide: Down (specific percentage not provided)

6. Logical Connections

The video establishes a clear connection between macroeconomic trends (potential shift away from large-cap tech), a specific investment strategy (screening for small-cap stocks with strong fundamentals), and the identification of five individual companies poised for growth. The discussion of the “big beautiful bill” provides a potential catalyst for increased consumer spending and infrastructure investment, further supporting the bullish outlook for small-cap stocks.

7. Conclusion

The video presents a compelling case for considering small-cap stocks as a potential investment opportunity in 2026. The identified stocks, while having experienced varying degrees of performance in 2025, all exhibit strong earnings growth potential and benefit from specific industry trends and macroeconomic factors. The emphasis on a data-driven screening process and the identification of undervalued companies offer a practical framework for investors seeking to capitalize on a potential sector rotation. The overall takeaway is that the small-cap sector may offer significant upside potential for investors willing to accept a higher level of risk.