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. That said, here are two small-cap stocks that could amplify your portfolio’s returns and one that may have trouble.

One Small-Cap Stock to Sell:

IPG Photonics (IPGP)

Market Cap: $3.64 billion

Both a designer and manufacturer of its products, IPG Photonics (NASDAQ: IPGP) is a provider of high-performance fiber lasers used for cutting, welding, and processing raw materials.

Why Is IPGP Risky?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 3.8% annually over the last five years
2. Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 15.1 percentage points

At $86.52 per share, IPG Photonics trades at 62.4x forward P/E. To fully understand why you should be careful with IPGP, check out our full research report (it’s free).

Two Small-Cap Stocks to Buy:

Alignment Healthcare (ALHC)

Market Cap: $4.72 billion

Founded in 2013 with a mission to transform healthcare for seniors, Alignment Healthcare (NASDAQ: ALHC) provides Medicare Advantage health plans for seniors with features like concierge services, transportation benefits, and technology-driven care coordination.

Why Are We Backing ALHC?

1. Customer growth averaged 41.2% over the past two years, showing its ability to "land" new contracts and potentially "expand" them later - a powerful one-two punch for sales
2. Earnings growth has massively outpaced its peers over the last four years as its EPS has compounded at 30.1% annually
3. Free cash flow turned positive over the last five years, indicating the company has passed a significant test

Alignment Healthcare’s stock price of $23.88 implies a valuation ratio of 66.6x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

Oscar Health (OSCR)

Market Cap: $4.15 billion

Founded in 2012 to simplify the notoriously complex American healthcare system, Oscar Health (NYSE: OSCR) is a technology-focused health insurance company that offers individual and small group health plans through its cloud-native platform.

Why Is OSCR a Top Pick?

1. Market share has increased this cycle as its 39.7% annual revenue growth over the last two years was exceptional
2. Earnings per share grew by 30.3% annually over the last four years and trumped its peers
3. Free cash flow margin increased by 12.8 percentage points over the last five years, giving the company more capital to invest or return to shareholders

Oscar Health is trading at $15.67 per share, or 0.3x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.

Don’t wait for the next volatility shock. Check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.