We recently compiled a list of the 10 Best Russell 2000 Stocks to Invest in According to Analysts. In this article, we are going to take a look at where The Ensign Group, Inc. (NASDAQ:ENSG) stands against other best Russell 2000 stocks to invest in according to analysts.
The Russell 2000 Index is a widely followed benchmark that tracks the performance of small-cap companies in the United States. This index includes the smallest 2,000 companies, ranging from a few hundred million to a few billion dollars in market capitalization. These companies are often seen as more growth-oriented and can be more volatile compared to their large-cap counterparts. Investors and analysts use the performance of the Russell 2000 Index to gauge the health and trends of the small-cap segment of the U.S. equity market, which can provide insights into broader economic conditions and investor sentiment toward smaller, potentially higher-growth companies.
The Russell 2000 Index has demonstrated significant strength over the past years. As of January 17, the index stands at 2,278.01, with a 19.07% increase over the past year and a remarkable 34.03% increase over the past five years. This robust growth reflects the resilience and potential of small-cap companies in the United States and highlights the strong investor sentiment and economic conditions that have favored small-cap stocks.
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In an interview with CNBC on January 17, Chris Retzler, Portfolio Manager of Small Cap Growth Fund at Needham Asset Management, discussed the current state and future prospects of small-cap stocks in the US market. Retzler acknowledged that while small-cap stocks, as represented by the Russell 2000 Index, have struggled compared to larger indices such as the S&P 500 and Nasdaq, there are signs of improvement, as the Russell 2000 has managed to break out of correction territory for four consecutive days, which is a positive signal.
Retzler emphasized that small-cap companies are looking for certainty in the U.S. economy, which is poised to have at some point in a few weeks or months. Once this certainty is established, Retzler expects to see an acceleration in market activity, driven by increased confidence and broader market participation. He highlighted the significant innovation occurring in sectors such as electric vehicles, semiconductors, and new materials, which could provide opportunities for small-cap companies to thrive. Retzler mentioned that infrastructure is also another key area of focus. He cited data centers and power supply as critical areas where infrastructure gaps are evident. The push for bringing manufacturing back to the U.S. is also creating a demand for more robust infrastructure to support these industries.
The discussion also touched on the challenges and opportunities presented by higher interest rates and the Federal Reserve’s pause in rate hikes. Retzler noted that while interest rates are higher, the yield curve is becoming healthier, with favorable conditions for lending, particularly through regional banks. Retzler acknowledged that lower interest rates would definitely benefit small-cap companies, however, the long-term bond rates are still relatively high, and there is a need to address the deficit spending and demand in the bond market before bringing interest rates down further.
Retzler emphasized the importance of a business-friendly regulatory environment, which includes tax incentives and deregulation. He noted that small-cap companies have often been overburdened by regulatory requirements, and any move toward deregulation could significantly benefit these firms. Tax incentives, in particular, can play a crucial role in encouraging companies to bring their manufacturing operations back to the U.S., which can lead to job creation and economic growth. Additionally, tax incentives can help reduce the cost of doing business, making it easier for small-cap companies to compete and expand. He also suggested that if the regulatory environment becomes more business-friendly, including potential deregulation, it could lead to more mergers and acquisitions (M&A) and a healthier IPO market.
The current economic conditions are becoming favorable for small-cap companies, with improvements in the economy, declining interest rates, and the potential for deregulation. These factors should benefit small-cap stocks and support their future growth.
A medical professional in a lab coat, talking to an elderly patient in a hospital bed.
Our Methodology
To compile our list of the 10 best Russell 2000 stocks to invest in according to analysts, we used Finviz and Yahoo stock screeners to find the 40 largest Russell 2000 companies. We then sourced the analysts’ average price targets and picked the 10 stocks that had the highest upside potential. We also included their stock price as of January 16 and their hedge fund sentiment, which was taken from Insider Monkey’s Hedge Fund database of 900 elite hedge funds as of Q3 of 2024. The list is sorted in ascending order of analysts’ average upside potential as of January 16.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
The Ensign Group, Inc. (NASDAQ:ENSG)
Upside Potential: 22.67%
Stock Price as of January 16: $136.55
Number of Hedge Fund Investors: 31
The Ensign Group, Inc. (NASDAQ:ENSG) is a holding company that provides healthcare services and owns healthcare real estate. The company operates a network of skilled nursing, rehabilitative care, and assisted living facilities across 14 states in the United States. The company focuses on providing high-quality healthcare services tailored to the elderly and individuals with complex medical needs.
The Ensign Group, Inc. (NASDAQ:ENSG) is focused on expanding its geographic reach and increasing market density. The company recently completed nine new acquisitions in Colorado, one in Kansas, one in Iowa, and one in Nebraska. These new acquisitions have added 1,279 new skilled nursing beds and 20 senior living units in 4 states. By doing so, the company aims to cluster operations in specific markets to create synergies and leverage shared resources, leading to more efficient and effective service delivery. This strategy also allows the company to build stronger relationships with acute care partners.
The Ensign Group, Inc. (NASDAQ:ENSG) is also focusing on improving occupancy and financial performance. Furthermore, The Ensign Group, Inc. (NASDAQ:ENSG) has a robust pipeline of acquisition opportunities and remains disciplined in its approach, ensuring that each new operation aligns with its strategic goals.
Overall ENSG ranks 8th on our list of the best Russell 2000 stocks to invest in according to analysts. While we acknowledge the potential of ENSG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ENSG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.