SMALL CAP STOCKS: LIST OF STOCKS TO BUY + TIPS

Small cap stocks can grow fast and are cheaper than large cap. These lesser known stocks have the potential for huge returns. Then practice what you've learned with our free stock market simulation.

SMALL CAP STOCKS LIST

SymbolCompany
CHGGChegg Inc.
IRBTiRobot Corp.
ZUOZuora Inc.
AAXNAxon Enterprise Inc.
WTWWeight Watchers International Inc.
SFIXStitch Fix Inc.
ROKURoku Inc.

WHAT ARE SMALL CAP STOCKS?

Small cap stocks are not actually that small. Small cap refers to the market capitalization of a company. While the range can vary depending on who you ask, small cap refers to a company with a market capitalization between $200 million and $2.5 billion. But what does that mean? Market capitalization has two parts, share price and number of outstanding shares. Multiply those two numbers together and you get what is called market cap. Share price is simply the price that a given stock sells for on the marketplace. Outstanding shares on the other hand, refers how many shares the company has issued. Small cap businesses are established, but are dwarfed by tech giants like AAPL, which has market capitalization at over $700 billion.

 

HOW TO FIND SMALL CAP STOCKS TO BUY

Small cap stocks are everywhere. These companies aren't your big fish that everyone has heard of, but can offer great returns in their own right. One of the best attributes of small cap stocks is that they have great growth potential. You hear all the time about people who invested relatively small sums into tech companies like GOOGLE and made ridiculous amounts of money. Invest in the right small cap stock and that could be you.

The reason these smaller stocks are able to grow so fast is that they still have a relatively low market capitalization. Its just not possible for bigger companies to grow as fast because they would eventually become unsustainably large. On other hand, a smaller company can double its market cap many times over as they come into their own. Choosing the right stock is the key to investing in smaller stocks.

Small cap stocks are great because their is less competition from institutional investors. Their funds are so massive that buying a smaller company has little effect on their bottom line. That means a level playing field, and great value with lucrative rewards. Every giant was once a small fry. Who knows what the next Microsoft will be?

 

SMALL CAP MUTUAL FUNDS

While it is difficult for mutual funds to invest in small cap stocks, there are some who specialize in taking positions in smaller companies. These mutual funds are highly specialized and require tons of man power due to the number of businesses they invest in. Because small cap mutual funds can only invest so much in each company, they end up investing in hundreds of different small companies. This can be a lot to manage considering each business has their own growth and risk.

Fund management can really shine when it comes to picking small cap stocks. That's because any hidden gem can result in a enormous return as they balloon in size. Imagine buying shares in tech giants like Microsoft, Facebook and Google before they made it big. When a fund manager hits a home run, anyone who invested in that mutual fund stands to make some cash. Look for well managed funds because the return will outweigh the manager's cut of the profits.

Not all small cap stocks turn into giants, its actually quite rare. That's why small cap mutual funds diversify into hundreds of different companies. Even if they don't get lucky, a lot of small cap stocks still have great value.


BEST STOCK NEWSLETTER OF 2020, September 27, 2020 UPDATE

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We have been tracking ALL of the Motley Fool stock picks since January 2016. That's almost 5 years and 114 stock picks. As of Friday, September 25, 2020, TWO of their 2020 stock recommendations have already quadrupled (ZM and TSLA), another one has tripled and 2 more have doubled (SHOP and NVTA all in just the first 9 months of 2020.

In addition, 7 of their 2019, 9 of their 2018, 9 of their 2017 and 12 of their 2016 picks have also doubled. Best of all, over the last 5 years the average stock pick is up 144%. That beats the SP500 by an average of 106%. And that's even accounting for all of this COVID mess that has wreaked havoc on most stocks. BUT, the Fool has done so well because they have quickly identified stocks this year that will perform well in the post-COVID world. THAT is how the Fool consistently does so well--they adapt and constantly pick stocks before everyone else realizes the opportunities.

  • Zoom Video (ZM) – April 16, 2020 pick and it is already up 230%
  • Shopify (SHOP) – April 2, 2020 pick and it is already up 177%
  • Zoom Video (ZM) – March 19, 2020 pick re-recommended and it is already up 301%
  • DexCom (DXCM) picked Feb 20, 2020 right before the market crashed and it is still up 33%
  • NVTA picked February 6, 2020 is up 102%
  • Tesla (TSLA) picked January 2, 2020 before the crash and it is up 373% 
  • HubSpot (HUBS) picked December 5, 2019 and it is up 92%
  • Netflix (NFLX) picked November 21, 2019 and it is up 55%
  • Trade Desk (TTD) picked November 11, 2019 and up 146%
  • Zoom Video originally picked Oct 3 and it is up 546%
  • SolarEdge (SEDG) picked September 19, 2019 and it is up 125%

Now, no one can guarantee that their next picks will be as strong, but our 5 years of experience has been super profitable. They also claim that since inception, their average pick is up 529% and now we believe them. Many analysts are saying that we have passed the bottom of this COVID crisis and "certain" stocks will recover quickly and be the new leaders. So make sure you have the right stocks in your portfolio.

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