Three Russell 2000 Stocks to Avoid: fuboTV, Hillman, and Park-Ohio.

The article discusses three Russell 2000 stocks that are not recommended: fuboTV (FUBO), Hillman (HLMN), and Park-Ohio (PKOH). These companies face challenges in scaling their businesses due to less stability and resources compared to larger counterparts. The stocks have poor expense management, low returns on capital, and negative free cash flow, leading to high-risk, high-reward nature of the Russell 2000.

Investors looking to diversify their portfolios with small-cap stocks in the Russell 2000 (^RUT) may find themselves drawn to the high-risk, high-reward nature of these companies. However, not all small-cap stocks are created equal. This article examines three Russell 2000 stocks that financial analysts have flagged as potential pitfalls: fuboTV (FUBO), Hillman (HLMN), and Park-Ohio (PKOH).

fuboTV (FUBO)
Originally launched as a soccer streaming platform, fuboTV (NYSE:FUBO) has since expanded to offer live sports, news, and entertainment content. Despite its growth, the company faces significant challenges. Performance surrounding its domestic subscribers has lagged its peers, and poor expense management has led to operating margin losses. Additionally, free cash flow margin is forecasted to shrink by 6.5 percentage points in the coming year, indicating that the company will consume more capital to keep up with competitors. At $3.60 per share, fuboTV trades at 77.5x forward P/E, making it an expensive proposition for investors [1].

Hillman (HLMN)
Hillman (NASDAQ:HLMN) designs, manufactures, and sells industrial equipment and systems for various sectors. However, the company has struggled with revenue growth, posting only 1.6% annual growth over the last two years, which is slower than its industrials peers. Its responsiveness to market trends is restricted due to substandard operating margin profitability, and low returns on capital suggest that management has struggled to allocate funds effectively. Hillman’s stock price of $9.76 implies a valuation ratio of 17.6x forward P/E, making it a riskier investment [2].

Park-Ohio (PKOH)
Park-Ohio (NASDAQ:PKOH), based in Cleveland, provides supply chain management services, capital equipment, and manufactured components. The company has faced stagnant sales over the last two years, signaling the need for new growth strategies. Its gross margin of 15.4% is below competitors, leaving less money to invest in marketing and R&D. Negative free cash flow raises questions about the return timeline for its investments. Park-Ohio is trading at $18.62 per share, or 5.5x forward P/E, making it a high-risk investment [2].

Conclusion
While the Russell 2000 offers potential for high returns, it is crucial for investors to carefully evaluate each stock. The high-risk nature of these small-cap stocks requires a thorough understanding of their financial health and growth prospects. Investors should consider the challenges faced by fuboTV, Hillman, and Park-Ohio before adding these stocks to their portfolios.

References:
[1] https://finance.yahoo.com/news/3-russell-2000-stocks-keep-135624437.html
[2] https://stockstory.org/us/stocks/nyse/fubo/news/buy-or-sell/3-russell-2000-stocks-we-keep-off-our-radar