Welcome to Episode #504 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, is joined by guests to discuss the hottest investing topics in stocks, bonds, and ETFs and how it impacts your life.
This week, Tracey was joined by Zacks Small Cap Analyst, Mark Zinski, to discuss what is going on with the small caps in 2026.
In the first half of the year, small caps outperformed the large caps for the first time in years. But as of Oct 2026, that has reversed.
Over the last 3 months, the Russell 2000 has fallen 5.6% while the S&P 500 is still in the green, up 2.8%.
A Small Cap Buying Opportunity?
Investors are abandoning the small caps as the Federal Reserve raises interest rates. Higher interest rates make it more expensive for small companies to borrow, which can slow growth.
But the weakness can create buying opportunities.
Mark brings his expertise in the small caps to the podcast with two small caps stocks to consider.
2 Small Cap Stocks for Your Short List
1. Catalyst Bancorp, Inc. (CLST)
Catalyst Bancorp is a small cap Louisiana bank with a market cap of $68.3 million. Founded in 1922 it has branches in South Central Louisiana.
In July 2026, Catalyst Bancorp acquired Lakeside Bancshares which has branches in Southwest Louisiana. This acquisition doubled its asset base.
Shares of Catalyst Bancorp are up 7.6% year-to-date. But it remains cheap. Bank analysts use price-to-book (P/B) ratios to determine a bank’s value. Investors should buy at a P/B ratio of 1.0 and sell at 2.0. Catalyst Bancorp has a P/B ratio of just 0.88.
Large data centers and SpaceX are going into Louisiana which should boost economic growth.
Should a Louisiana bank like Catalyst Bancorp be on your small cap short list?
2. NVE Corp. (NVEC)
NVE Corp. develops and sells devices using spintronics, a nanotechnology it helped pioneer. It has licensed their spintronic magnetoresistive random access memory technology, commonly known as MRAM. NVE Corp is a small cap with a market cap of $354 million.
Shares of NVE Corp. have fallen 33.3% in the last month on the AI and semiconductor sell-off. Yet it recently reported fiscal second quarter 2027 earnings and saw gross margins of 78%.
NVE Corp. also pays a quarterly dividend of $1.00 per share which is currently yielding 5.9%, thanks to the sinking of the stock.
Should a small cap technology company like NVE Corp be on your short list?
What Else Do You Need to Know About the Small Caps?
Tune into this week’s podcast to find out.
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NVE Corporation (NVEC): Free Stock Analysis Report
Catalyst Bancorp, Inc. (CLST): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).