These Under-the-Radar Stocks Beat the Market Wednesday

Stock markets were mixed on Wednesday, initially climbing but giving up ground in the middle of the day. The S&P 500 (^GSPC 1.02%) and the Nasdaq Composite (^IXIC 2.02%) managed to claw back to modest gains, but the Dow Jones Industrial Average (^DJI 0.40%) finished lower.

Data source: Yahoo! Finance.

Small-cap stocks did extremely well, with the Russell 2000 Index climbing nearly 1% on Wednesday. Part of the gains came from strong performances from small-caps like Hayward Holdings (HAYW 1.25%) and GEO Group (GEO 0.54%). Below, you'll learn more about what sent those stocks higher and why investors might want to look more at under-the-radar small-cap stocks.

Hayward gets recognized

Shares of Hayward Holdings were up 8% on Wednesday. The maker of pool equipment and outdoor living technology got an invitation to become part of a prestigious stock market index, lifting awareness of the company and reflecting its past success.

Hayward will join the S&P SmallCap 600 Index effective Friday, Sept. 29, according to S&P Dow Jones Indices. The index manager needed to fill some gaps, as the acquisition of Syneos Health by private-equity investors meant that a spot became available in the S&P MidCap 400. That in turn created a snowball effect, as the company that replaced Syneos had previously been in the S&P SmallCap 600, which opened up the spot that Hayward will take.

Hayward came in early 2021, having priced its initial public offering (IPO) at $17 per share. The business had benefited in 2021 from the huge interest in home upgrades that came early in the COVID-19 pandemic, as homeowners took steps to outfit their properties with amenities like swimming pools. Since then, however, the company hasn't fared as well, with sales falling in 2022 and with 2023 on track to reflect an even bigger pullback in revenue to levels closer to what prevailed prior to the pandemic.

Like many sellers of consumer-discretionary items, Hayward has been vulnerable to macroeconomic pressures. However, in the long run, the company has an opportunity to keep making progress and to demonstrate the quality of its product offerings.

GEO rises on a renewed vote of confidence

Elsewhere, GEO Group shares were up 4%. The move came after a research company known largely for panning stocks it intends to sell short actually praised the company and predicted better times ahead.

Short-selling specialist Citron Research said a couple weeks ago that it believed that GEO Group was positioned well given the flood of immigration into the U.S. from abroad, as the private-sector company offers alternatives to traditional detention centers for migrants. GEO operates special-purpose residential centers on behalf of the U.S. Immigration and Customs Enforcement (ICE) agency.

In addition, Citron believes that GEO's technology could become increasingly important to its overall success. GEO offers its SmartLink app to monitor migrants, and Citron believes adoption of the technology could climb in the near future.

With Citron believing the stock could reach $20 per share, today's gains leave plenty of room for upside. In particular, with shares fetching less than $8 even after Wednesday's jump, shareholders are hoping that Citron's call proves prescient.