Small Caps Gain Momentum In June, Potential Trend Reversal: Russell 2000 Top Performing Stocks

Small-cap stocks have been on an ascent in June, with the Russell 2000 Index, tracked by the iShares Russell 2000 ETF IWM beating larger-cap indices including the S&P 500, Nasdaq 100, Dow Jones, and Russell 1000, which may portend a potential turning point in the prevailing market trend of 2023. 

Since the start of the year, small caps have faced an uphill battle in the market, particularly when compared to their larger counterparts. Following the regional banking crisis in March, the Russell 2000’s underperformance has intensified. But the escape from a highly anticipated economic recession for now has provided a much-needed sigh of relief for small cap companies, which heavily rely on economic growth to thrive and expand their businesses.

The chart below illustrates how the iShares Russell 2000 ETF began to outperform the SPDR S&P 500 ETF SPY, the Invesco QQQ Trust QQQ, the Dow Jones Industrial Average ETF DIA, and the iShares Russell 1000 ETF IWD in the month of June.

Chart: Small Caps Recovered In June, But Still Trail S&P 500 And Nasdaq 100 YTD

Russell 2000: Stock & Industry Contributions

Several specific stocks and sectors have played a significant role in driving the rally of the Russell 2000 Index in June:

Banks: Each small-cap bank in the Russell 2000 Index showed a positive performance in June, as the industry strives to rebound from the upheaval of the previous months. The best performers were:

• First Foundation Inc. FFWM, up 32.7% month to date as of this writing
• HomeStreet Inc. HMST, up 30%, and
• Metropolitan Bank Holding Corp. NCB, up 29%.
• SouthState Corp. SSB, the largest bank in the Russell 2000 index, rose by 14%.

Read also: Rising From The Ashes: 5 Undervalued Regional Bank Stocks Poised For Growth As Industry Rebounds

Energy: In June, the median energy stock in the Russell 2000 index increased 11%, with 94 of 97 companies in this sector posting positive returns. The best performers were:

• Cactus, Inc. WHD, up 31%
• Aemetis, Inc. AMTX, up 30%
• Newpark Resources Inc. NR, up 27%.

Industrials: A positive contributions also came from industrial small-cap stocks.

• CIRCOR International, Inc. CIR climbed 65%,
• Energy Vault Holdings Inc. NRGV rose 35%
• Quanex Building Products Corporation NX was up 29%

Diversified Health Care Trust DHC, a real estate investment trust (REIT) that focuses on investing in healthcare-related properties, was the Russell 2000’s best-performing stock in June, climbing 86% month to date.

The small cap with the highest year-to-date return is Applied Digital Corp. APLD with a nearly 400% gain.

Now Read: Bezos May Be Worth $150B, But He Pays $600K A Month In Rent To A Legendary Musician

Photo: Shutterstock