Small Caps Are Crushing the S&P 500—3 Stocks Still Worth Buying

Summary

Sector rotation doesn't always mean money moving from sector to sector. In many cases, investors see capital moving from large-cap to small-cap stocks. That's precisely the shift playing out in 2026, and the numbers back it up. Through July 21, small-cap benchmarks have meaningfully outpaced the S&P 500 over the trailing three months, as investors rotate away from mega-cap concentration risk and into names with more room to run. With mega-cap tech trading at historically rich valuations after years of AI-driven gains, both institutional and retail investors are hunting for the market's next leg higher. Small-cap stocks, many of which sat out the narrow rally of the past few years, offer that alternative.Get UFP Technologies alerts:Sign Up But not every small-cap stock deserves a place in your portfolio just because the group is back in favor. Investors still need to separate the names with durable earnings power from those simply riding the wave. Below are three stocks that combine the sector rotation tailwind with company-specific catalysts worth watching heading into the back half of 2026. UFP Technologies Stock Could Rebound After Earnings Headwinds EaseUFP Technologies NASDAQ: UFPT is a contract development and manufacturing organization that specializes in comprehensive solutions for medical devices, sterile packaging, and other highly engineered custom products. In layman’s terms, it’s not the name doctors and patients see on the package, but it’s a critical part of the medtech supply chain. UFP Technologies TodayUFPTUFP Technologies$241.38 -2.56 (-1.05%) As of 02:49 PM Eastern This is a fair market value price provided by Massive. Learn more.52-Week Range$173.86▼$279.49P/E Ratio27.40Price Target$289.00 In its June 2026 investor presentation, the company forecast that the global medical device market would grow to approximately $518 billion by 2032, with a compound annual growth rate (CAGR) of about 6.3%. For all the reasons investors may have to go long UFPT,...