3 Small-Cap Stocks that May be Worth Big Bets

Publish Date:

Tuesday, August 23, 2016 4:30 am CDT

News Organization:

CBS MoneyWatch

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Small is still beautiful, especially when it comes to stock investing. And interestingly, after a long period of underperformance, small-cap stocks have been besting the large-caps since February. Close watchers of the market’s various sectors argue that small-cap investing has proven to be the better play over the long term. These little-company stocks are the typically included in the Russell 2000 rather than the S&P 500, which tracks the market’s large-value shares.

“It is well documented that one dollar invested in small cap stocks from 1925 to today would return $27,000, as compared to only $5,000 for the S&P 500 and only $110 for U.S. Treasury securities,” said Nick Galluccio, head of small-cap investing at Teton Advisors, a unit of investment firm Gabelli & Co.

He noted that small-cap stocks are generally investment plays on the U.S. economy, which continues to outperform the economies of other major countries.

True, the small caps have been on the rise along with the major stock market averages, which have continued to establish new all-time highs (chart below). But the pint-size stocks remain attractively priced nonetheless, according to a recent Bank of America/Merrill Lynch report, which points out that they’re undervalued compared with the large-caps -- for the first time since 2003.

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