Benefits of Small-Cap Stocks

The small-cap stock universe is exciting. Small companies have the potential to grow more dramatically and more quickly than their larger counterparts, providing unique opportunities for investment. However, researching investment opportunities in small-cap companies requires a special expertise.

Anyone with access to a computer can find information on large-cap companies. But although there are twice as many small-cap companies as mid- and large-cap companies, small-cap companies usually aren't covered in the national news. They may not make products used by mass consumer groups and Wall Street typically doesn't produce as much analysis on their stock. The lack of broad research coverage for smaller companies may lead to stocks that are not priced properly. Investors who find such companies stand to profit if others, particularly large institutional investors, later “discover” that stock and subsequently increase its price.

We typically invest only in those companies with market capitalizations between $200 million and $2 billion. We use the popular Russell 2000 Index as the benchmark for our performance.