The Russell 2000 Index (INDEXRUSSELL: RUT) is a market index made up of 2,000 small-cap companies. The companies in the index make up the bottom two-thirds of company size in the Russell 3000 index. In the first half of 2023, the Russell 2000 is up about 6.4%.  

That’s far below the performance of the S&P 500 or the NASDAQ indices. But it’s almost double that of the blue-chip Dow index.  

For investors looking for solid growth opportunities in the second half of the year they could do worse than to look at stocks in the Russell 2000. That's because when the economy weakens, investors tend to shift away from riskier growth stocks to blue chip, large-cap stocks.  

But as the recent market rally is showing, investors may be looking to play offense again. Historically, that means a shift back into small-cap stocks.  

And even if the economy drifts into a recession, history says that’s bullish for small-cap stocks. Small-cap stocks have a history of outperforming during prior recessions even as the Fed tightens monetary policy. 

This isn’t a time to go all-in on growth stocks, but if you’re starting to feel more bullish about the market, here are three small-cap stocks that should have some upside. 

Look Past the Noise with iRobot 

The big news surrounding iRobot Corporation (NASDAQ: IRBT) comes from Amazon.com, Inc. (NASDAQ: AMZN), which has made an offer to buy the company. The deal has been approved in the United Kingdom (UK) but is being heavily scrutinized in the European Union (EU) and the United States. 

The concern is the security of consumer data. And admittedly, the timing couldn’t be worse as Amazon is drawing the ire of the Federal Trade Commission (FTC) after allegations of duping millions of consumers into Amazon Prime subscriptions without their consent.  

The biggest risk for the stock is that the deal won’t go through. But if you believe it will, then at $45.20 a share as of July 5, IRBT stock is trading at a discount to the announced deal price per share of $61.  

A Sector That is Starting to Live Up to the Hype 

While electric vehicles and solar energy are dominating the conversation about renewable energy, it may be time for investors to consider the opportunity in hydrogen. At a time when there is a heightened focus on clean energy, hydrogen, particularly green hydrogen, is one of the only truly clean forms of energy available.  

FuelCell Energy, Inc. (NASDAQ: FCEL) manufactures and sells stationary fuel cell energy platforms that decarbonize power and produce hydrogen. Like many stocks in the sector, FCEL stock has been a victim of FOMO. This has been a sector where investors have fallen for the hype on more than one occasion.  

That appears to be changing with the Inflation Reduction Act passed by Congress in 2022. This is providing incentives to companies that make the transition to hydrogen. The combination of financial backing along with political will is bullish for hydrogen stocks in general.  

Analysts are mixed on their outlook for FCEL stock, but the FuelCell analyst ratings on MarketBeat have a consensus price target that gives the stock a 37% upside from its current level.  

A Crowded Market with Lots of Opportunity 

The last stock on this list is EVgo, Inc. (NYSE: EVGO). The company is one of many companies competing in the EV-charging space. Particularly, EVgo develops the DC fast-charging stations that will be essential to decreasing range anxiety for EV owners. 

The big news for the company comes from its partnership with Pilot Flying J and General Motors Company (NYSE: GM) to create a nationwide charging network with over 2,000 stalls. When complete, the company will have doubled its footprint. And there will likely be more growth to come.  

This is showing up in the company’s revenue which is significantly growing year-over-year. That’s also allowing the company to close its gap toward profitability. It’s not there yet and won’t likely be there in 2023.  

That may be why analysts have mixed outlooks for the company. But the current consensus price target suggests there could be a 90% increase in share price in the next 12 months. For a modest investment, EVGO stock may be a risk worth taking.