5 Small-Cap Stocks to Watch in 2026 as Investors Rotate Out of Big Tech

Core Insights - The Russell 2000 small-cap index is up approximately 11% for the year as of December 18, indicating a strong performance heading into 2026 [2] - Analysts predict that 2026 will be a favorable year for small-cap stocks as investors seek opportunities outside of overvalued tech stocks, particularly the Magnificent 7 [3] - Five small-cap stocks are highlighted as potential investment opportunities for 2026, focusing on sectors such as industrials, semiconductors, energy infrastructure, AI security, and consumer brands [7] Company Summaries - Gorman-Rupp Co. (NYSE: GRC): This company operates in the industrial sector, specializing in pumps and pumping systems. GRC stock has increased by about 29% in 2025, with analysts forecasting a 13.6% earnings growth in the next 12 months. The consensus price target suggests a potential 19% upside, alongside a modest dividend yield of 1.57% [4][5] - Ultra Clean Holdings Inc. (NASDAQ: UCTT): A supplier of critical consumables and process tools for the semiconductor manufacturing industry, UCTT stock has seen a decline of over 29% in 2025 due to weaker-than-expected revenue and earnings. However, it has rebounded by about 12% in the 30 days leading up to December 18, with a consensus price target indicating a projected upside of approximately 30% [6][8]