I keep hearing that small cap stocks are the place to be right now. Why?
Answers
190 points
HoughtonAndAtkeson answered 11 months ago …
Small-cap stocks tend to be equity- rather than debt-financed. Although this is not an attractive time to raise growth capital through equity (2008 had the fewest number of initial public offerings since 1979), many of these companies do not have meaningful levels of long-term debt. Some studies show that, after a difficult year in the market, average small-cap-stock gains in the following year are about 20%.
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132 points
imgamekc answered 11 months ago …
Small-cap stocks are often the leader as far as percent gains coming out of a bear time in the market. I would warn against jumping in any single stock at this time. If you are really looking for a small cap play. You could drop some money into TNA it is a small cap X3 bull ETF. So it is leveraged to a small cap portfolio with 3 times the exposure either way. A word of caution anything leveraged can be subject to bigger moves to the upside as well as the downside. It has the benefit of being a basket of small cap stocks so not any one single position can hurt you as much.
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3963 points
MNSL answered 11 months ago …
Yes some small stocks will outperform market in 2009. Blue chips will underperform except stocks belong to next rotating sector and some few quality stocks. Few small banks and insurance companies also will outperform the market.
There are plenty of small stocks with less debt and some are belongs to next rotating sectors. Their businesses are not going to affect much in the current mess. Some will have above average growth in 2009 and 2010. Some small stocks will recover rapidly in 2009.
In a sector based bull market some small stocks will appreciate rapidly. Some small stocks will become large stocks time to come.
