Donald Trump’s return to the White House has set small-cap stocks on fire, spotlighting their potential under his renewed leadership. The iShares Russell 2000 ETF (IWM), which tracks the small-cap index, surged over 5% — making it one of its best days since 2022.
Small-cap stocks are primed to shine in this environment as investors look forward to relaxed regulations, which tend to weigh more heavily on smaller businesses. Trump’s domestic-focused agenda, pro-deregulation stance boosting small business confidence, increased M&A activity under a more lenient DOJ/FTC, extended tax cuts, and a potential fiscal boost in 2025 are all major tailwinds that could propel small-cap performance.
We’re already seeing sparks in the market: private prison stocks like Geo Group and CoreCivic leaped around 20%, while crypto-related names such as Riot Platforms and TeraWulf jumped 12%. While small caps have trailed behind their large-cap peers for much of 2024 — with IWM up 11.7% compared to the S&P 500’s 21% — the tide seems to be turning.
With the economy holding strong, higher interest rates being absorbed, and election-related uncertainty fading, small-cap stocks are set for a potential breakout. Historically, small caps have also outperformed in the months following presidential election wins, including Trump’s 2016 victory and Biden’s in 2020.
Now is a great time to dive into the small-cap space. This watchlist will guide you through the top small-cap stocks ready to take advantage of the evolving political and economic landscape.
ACM Research, Inc. (NASDAQ: ACMR) – A High-Growth Semiconductor Play
ACM Research is a U.S.-based company specializing in single-wafer wet cleaning equipment for semiconductor manufacturers. Their products remove particles and contaminants during integrated circuit fabrication, boosting yield and performance. ACMR has shown impressive growth, with a 3-month performance gain of approximately 14%. In Q2 2024, ACM Research reported revenues of $202.48 million, a 40.1% year-over-year increase, and EPS of $0.55, surpassing $0.48 from the previous year. With an average yearly expected EPS growth of 42.7% over the next five years and a forward P/E of 11.5, ACMR is positioned for strong growth.
Titan Machinery Inc. (NASDAQ: TITN) – Solid Performance in Agriculture and Construction
Titan Machinery operates over 100 full-service agricultural and construction equipment dealerships in the U.S., Europe, and Australia. The stock has gained 14% over the past three months. In Q2 FY2025, Titan Machinery reported $642.6 million in revenue, up 29.4% year-over-year, and EPS of $1.32 compared to $1.10 in the prior year. Analysts project an average yearly EPS growth of 25% over the next five years. The forward P/E of 6.3 suggests a buying opportunity as TITN trades below its 52-week high.
Stride, Inc. (NYSE: LRN) – Leading the Way in Online Education
Stride, Inc. provides online K-12 education and career learning programs across the U.S. Over the last three months, the stock has risen 24.1%, outpacing the broader Zacks Schools industry. In Q1 FY2025, Stride reported $480.2 million in revenue, up 10% year-over-year, with EPS at $1.15 versus $0.95 the prior year. The company’s strong growth prospects, with an average yearly EPS growth of 20% over the next five years, and its forward P/E of 13.8 make it an attractive pick.
Investors looking to capitalize on the new political and economic landscape should keep an eye on these small-cap stocks poised for strong performance.
