Underfollowed Market Segment
- Thousands of small cap stocks (<$3B): infrequently covered by Wall Street research or institutional investors
- Leads to an inefficient market, which can cause mispricing of high quality companies
High Quality, Market Leaders
- Small cap companies can often dominate a market niche
- Market leadership can lead to high returns on capital, high free cash flow generation, and high growth rates
Higher Volatility = Greater Opportunities
- Lower liquidity in small cap stocks leads to higher volatility than large cap stocks
- Long-term, disciplined investors can capitalize on these short-term swings
Attractive Acquisition Targets
- Large cap companies are often on the look-out for good businesses that can fill out their portfolio
For informational purposes only. Not to be construed as investment advice. Small-Cap investing involves greater risk not associated with investing in more established companies, such as greater price volatility, business risk, less liquidity and increased competitive threat.