The Micro-Cap Advantage Is VERY Real
The inefficiency of research, sponsorship and visibility in the < $500 million market cap stock world has always been my prime motivator as an equity analyst—i.e. to take ADVANTAGE of the invisibility of micro-cap stocks.
The Ibbotson & Associates latest report on small stock returns says it all.
Since 1983, Ibbotson & Associates has reported on the historical returns of various categories of assets. Their initial volume of the Stocks, Bonds, Bills and Inflation Yearbook traced the annual returns of stocks, bonds and Treasury bills back to 1926 and they have updated the monthly and annual returns for these categories ever since. As can be seen in Table 1 of their report, the compound annual return of small company stocks has surpassed that of large company stocks (defined as the total annual return of the Standard & Poor's 500 Index) during this period. The 2.1 percent compound annual return differential favoring small company stocks is by no means a trivial amount. A hypothetical $1.00 investment in the S&P; 500 Index made at the beginning of 1926 would have grown to $2,592 at the end of 2009, while a similar hypothetical $1 investment made in a portfolio of small firm stocks would have grown to $12,231.
That's close to a five-fold advantage for smaller company stocks. Click here to see the full report.
About the Author
Founder and Editor-in-Chief NBTEquitiesResearch.com. Contributor and Anchor Fox News Channel and Fox Business Network. Chairman & CEO NBT Group,Inc., a boutique private capital investment bank and investor relations organization.
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