Small cap stocks have a history of providing higher relative returns compared to the rest of the stock market. They typically outperform and recover faster than mid and large cap stocks. 2010, thus far, has proved no different. The Russell 2000 gained about 11.2 percent in 2010 and according to the WSJ, year to date, the small-cap S&P 600 is up about 18% while large-cap S&P 500 is up less than 9%.
An explanation for the continual strong performance is that smaller companies tend to thrive during low-interest-rate environments because it does not cost much capital to fuel growth. Thus, small cap companies have been at an advantage for the past decade. Since 2000, small cap stocks as measured by the S&P 600 have risen 100%, or 7.1% per year, compared to the large cap oriented S&P 500 which has fallen 18% over this time frame.
However, small cap stocks are not bullet proof. For instance, compared to large cap companies, financials for the 1st quarter in 2010 were not as impressive for small cap banks . According to Keefe, Bruyette and Woods, about 78 percent of large-cap banks beat estimates while only 16 percent missed while 53 percent of small-cap banks beat and 38 percent missed. Additionally, some note that in the future, as markets get riskier, value rather than growth will have to be the focus.
Whatever the future holds for small cap, small cap research remains an active and growing area of interest for investors. In the coming week Integrity Research will publish our latest ResearchFocus report focused on US Small Cap Research. For this report , Integrity Research interviewed 141 U.S. mutual fund, hedge fund, and pension fund portfolio managers and analysts who use external sources of small cap research in order to identify trends and demands in small cap usage and determine the top US small cap research providers. This comprehensive guide will serve to assist investors in identifying high quality small cap research providers in various sectors of the market.
For more information on the exact publication date and the price of this upcoming ResearchFocus report on US Small Cap Research, please contact Matthew Bannister at 646.786.6851 or e-mail him at matt.bannister@integrity-research.com