Personal Philosophy

There are many things that make small cap stocks unique, and that is why a lot of institutions and certain investors tend to not have much exposure to them.

These are some of the reasons

  • There is less information about the companies in general, media coverage can be very limited at time

  • A lot of times they are known or well known in their region and not always nationwide. Think about local fast food chains vs. the franchises like McDonalds or Burger King

  • Some investors limit themselves market cap

  • Often times, the companies themsleves are at a more beginning stage, and many investors don't have the time or the stomach to see them to fruition.

  • The industries themselves tend to be young, you do not start in a unique industry or with a unique business model with an exorbinant valuation, 9 times out of 10.

On the other side of this there just as many reasons why you should be looking at small cap stocks.

  • The finders fee: many institutions and large investors want a good number of analysts covering the stock. So many times, companies only hit their radar given a certain statistic such as: 5 analysts, revenue of $3 Billion, or Market Cap of at least $2 Billion. They simply do not want to waste their time in most cases researching potential stocks that do not their specific requisite(s).

  • Media coverage from financial outlets like Bloomberg, CNBC cover the big dogs like Apple, Google, Tesla to name a few. The viewers want coverage on these stocks because they are the ones that influence the market and are most popularly owned.

  • If you are looking for companies that have great valuations that would be "safer investments" from that standpoint, you would find a lot more of these companies under $1 Billion rather than companies that are higher than $40 Billion. Simply because there are only about 400-500 companies that have $40 Billion+ in market cap.

  • The diversity in business models is much more vast with small cap stocks. This is a double edged sword, while some are on the edge of innovation others are on their last legs.