3 New Small-Cap Momentum Stocks We're Buying for 2026

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Small-cap momentum is one of the few investment styles that becomes obvious once you watch it unfold in real time. A business begins to improve in measurable ways. Revenue growth accelerates. Margins expand. Cash flow turns positive or inflects sharply higher. Guidance rises instead of disappoints.

Those fundamental improvements do not stay hidden for long. Institutions that previously ignored the stock start building positions, and once large buyers show up in a small-cap name, the price action changes in unmistakable ways. Pullbacks become shallow. Down days are met with buying. Breakouts occur on volume. Demand overwhelms supply.

That is the only definition of momentum that matters to me. Momentum is not about chasing stocks that went up yesterday. It is about identifying companies where real fundamental improvement is attracting sustained institutional buying pressure.

In small-caps, that dynamic can be especially powerful because share supply is limited. A few large buyers accumulating positions over weeks or months can dramatically reprice the stock. When fundamentals and price confirm each other, momentum becomes durable rather than speculative.

Richard Driehaus built his career around this idea, focusing on stocks where earnings acceleration and price strength reinforced one another. His philosophy rejected the notion that a rising stock was automatically “too expensive” and instead recognized that improving businesses tend to keep improving longer than most investors expect.

Monster Beverage $MNST ( ▲ 0.33% ) remains one of the cleanest historical examples of this process at work. In its early years as a small, obscure company, improving fundamentals attracted institutional attention, price broke out decisively, and the stock compounded at rates that seemed impossible in hindsight. The lesson was not the magnitude of the gain, but the process that produced it. Fundamental change came first. Sustained buying followed. Price confirmed the shift.

This approach demands discipline, particularly on the sell side. Momentum investing is not about buying and hoping. It is about constant evaluation. When fundamentals weaken, when growth stalls, when margins roll over, or when guidance deteriorates, the reason institutions bought the stock disappears. When price momentum breaks, when leaders start failing on breakouts or violating long-term trend support, the market is signaling that demand is fading. At that point, hesitation is costly.

This is where the “weed the garden” mentality becomes essential. Strong momentum portfolios, like our Small-Cap Momentum Portfolio, are living systems, not static collections. Winners are allowed to grow and compound. Losers are removed quickly before they drain capital and attention. Peter Lynch’s flowers-and-weeds analogy captures this perfectly. The discipline of cutting positions that lose either fundamental or price momentum is not a defensive tactic. It is what allows capital to be continuously redeployed into new leaders as they emerge.

That’s exactly what we’re doing today, by removing three stocks, and replacing them with three new ones.