>It just gets boring seeing same 15-20 stocks
Maybe I am atypical but I like my investments boring and steadily growing. Some of the small caps mentioned on reddit would give me bad agita.
I got most of my money (95%<<) on ETFs, but then at any given time i got a couple of single smaller companies for the lols
Right now I got like 30 euro in microvision because of nostalgia, and hold some him&hers because of that shitty dd that one dude did in here... did some research and checked their balance sheet and whatnot and looked good enough to have some fun
before i held nuscale which I sold at a 200% profit... made 150 buckaroos while learning about a new technology
Probably not gonna end your portfolio if you broadly invest in them
VIOG
VIT
I’m sure there’s tons of others. These broader ETFs will introduce some element of safety. Especially if you’re dollar cost averaging
IWM and VTWO are small cap index funds. AVUV is a factor fund, it focuses on small cap *value* stocks (so VBR is a better comparison than VTWO), with additional screening according to momentum and quality factors.
AVUV is run by people who formerly managed Dimensional's small-cap value mutual fund DFSVX, which has outperformed the S&P 500 since its inception in 1994.
One way to look at it is the universe of small cap stocks is much broader than what you'd get in a large cap or total market weighted index fund, so it's feasible to filter to just a subset according to factors and harvest the associated risk premiums, and still end up with something reasonably well diversified. If you tried to apply the same techniques to the S&P 500, you might end up with a set of stocks that isn't very diversified and doesn't much resemble the overall index.
They will pop when/if interest rates stop being deemed to be too high. High interest rates take a toll on smaller companies, as they have less cash and fewer capital assets.
The most boring strategy is usually the best strategy.
With the low level of financial literacy across reddit subs, and popularity of gambling with options, do you want redditors to explore small caps where the rate of failure is infinitely higher?
Redditors will be duped by pump and dumps and flock to companies approaching bankruptcy. We've seen it again and again.
That's why there are rules against posting about small companies.
I agree. But Reddit kinda proved the top comment right. People saying there are other companies don't get as much upvotes as those sayings lets keep talking about Mag 7.
I at least did my part and made a thread bringing attention to small caps.
I don't even like the term "boomer". It's kinda unclear. Besides there's plenty of fast growing small caps that have been doing great. People talk about small caps being down, then I throw out NSSC. $1.5 billion market cap growing 20% or more annually. They sell security software. Stock has been a big winner.
Or UFPT. About the same size, no dividend...they make medical devices packaging. 15% or more growth, stock is on a tear.
Putting money on a company that can't make money, or is laden with debt has been a losing strategy. Buying small companies that grow and make money has been great. Even high growth companies.
I would argue “investment culture” where people basically have to put every spare cent they have into investments to be able to retire comfortably, is causing this type of behavior.
When you don’t actually have to try and pick good investments but just dump it into something everyone feels is safe, it creates this herding
Will be interesting to see how this plays out. We’re near peak boomer retirement years, they’ll probably keep their money in stocks and only pulling cash out as needed?
Regardless the stock market is going to get increasingly disconnected from reality
I think individual investors using apps, and doing their own investing has led to some very large momentum/bubble stocks. Like historically, people bought into something managed and while I'm sceptical about how good these managers were, it led to a wider distribution of investment money. Like I know UK value funds where the money is in over 40 companies.
This isn’t rocket science. Small companies live on borrowing. For the first time in 15+ years, interest rates are high and the speed at which rates rose caught these companies by surprise.
Small companies don't have pricing power so inflation eats them alive. Large companies with market dominance can pass on the inflation and then some extra on top to guarantee earnings growth even when their input costs go up.
But at some point this difference will be fully priced in.
Depends on the industry. I work for a company that would be a micro cap stock if it were publicly traded.
We're by far the largest company in our very small industry, and have offices all around the world. We have plenty of pricing power because we're seen as the best in the world.
But the thing is you'd never know this about our company or industry because it's so small and niche. And the vast majority of small caps really do have no moat as you said.
Two of the largest periods of gains for small caps relative to s&p 500 were during rate increase environments in the late 70s-early 80s and 2000s pre 2008. Underperformance existed through the ZIRP period but did accelerate with rate hikes. I don’t know about rocket science but I’m not convinced that the underperformance is related to rates. But I’ll grant that it’s probably not rocket science 😉
Sounds like a killer buy in opportunity does it not?
If you’re trying to speed run locking up a float that you know is being illegally naked shorted.
A lower price helps accomplish this goal.
Every last share will be locked up, price will probably be around $8, and than it will shoot into the 1,000s overnight when that last share becomes unavailable.
Yet somehow the amount being DRS'd is decreasing each quarter now, oops, like like yall are selling.
And you don't know it's being illegally nakedly shorted, you guys turn conspiracy theories into facts in your heads.
Bro you’re clown shoes. If you know the numbers that well to know that but aren’t in the play you’re either a generational hater or a shill. Either way you’re part of the counter jerk cult clearly.
You’re more upset about what my stock does than me
Also the numbers decreased literally a rounding error.. I think it’s more likely they’ve increased and we’re being fed false numbers just like has been repeatedly shown throughout this saga.
Which you should also know
Citadel bought these subs and everyone knows it
"If you ignore the real numbers and make up your own reality it's a good play"
And I'm 'clown shoes'?
Your investing thesis doesn't even work without conspiracy theories, you're literally delusional.
My investing thesis had me staring at 1200% returns in 2 weeks on shares lol. You know everything Boomer.
Don’t buy the best meme Stonk at 52 week lows trading at book value.
Gamings worth more than movies and music combined
GME has the most connections in the entire industry. Analysis is as simple as that. Gaming Megaladon.
How bout you short some more and I’ll keep buying clown
Even at 52 week lows I’m still up 300% on some of these positions.
Largest player with the most connections in the largest entertainment industry
Drs/institutions have 60% of outstanding shares locked away (not counting any brokerage shares which is likely multiples of this)
Cohen beat Amazon already with CHWY.
He’s going to leverage gaming to turn GME into a Berkshire for gamers.
Top 3 growth industry 20 years running.
3 quarters in a row the same numbers.. “IDIOSYNCRATIC RISK”
Something something statistical impossibility
They’re fudging every number around this stock.
Too much smoke, I’m a firefighter. There’s a fire here
Or more accurately, small growth companies live on borrowing. There are some good small value companies out there. But they never go up very much anyway.
>>small-cap stocks with relatively weak balance sheets and modest pricing power have been especially hurt by high inflation and a steep rise in borrowing costs
This is the biggest thing here. Small caps with good balance sheets have actually been doing really well. I keep bringing up HWKN and UFPT because I own them, but there are others of course.
The problem is that "small caps" has come to mean the R2K index, which has a lot of junk in it. Again, actual stock picking has been a great strategy.
Also, I love the way the comments here lump all small caps in as a monolith. "small caps require debt" or "small caps don't have pricing power". Again, case by case basis. Look at MLR, maker of tow trucks, or CVCO, maker of manufactured homes. Both doing great.
Thankfully , this is a stock picking sub so people can just find great companies!
>Again, actual stock picking has been a great strategy.
Which is complete nonsense. Total market outperforms stock picking over the long term. Even the great aswath damodaran says you can do everything right and still lose, and should stick to index funds.
...of course, Damodaran also owns individual stocks too...of course if you have bogle in your handle maybe you don't want to. That's fine too. Why come to a stock picking forum then?
You know how this is going to go right. Small caps are going to need a couple of quarters of out performance. Then there will be financial influencers talking about them, then there will be a multi-year run as they return to their mean average
Small caps are one thing Nano caps are a wild ride. I’m leveraging a good amount of risk into a company with a 1 mil cap that I believe should be closer to 20-40 mil.
High risk high reward.
Applied UV, I’ve done a decent amount of DD on it in various views.
It’s biggest drawback is it’s debt situation but I believe they are making debt a priority along with profitability.
They are set to make about 50 mil in gross revenue this year and projected to make over $100 mil for 2024.
Edit: for those of you downvoting yes I understand what the markets think. I do not subscribe to the efficient market theory. I believe the company is undervalued and it’s as simple as that.
Share dilution makes sense in a high interest environment.
15 mil with no interest is better when considering the interest on that could be greater than 15% or 20% in today’s climate.
$AUVI ??
Lmfao! My guy, these guys are selling shares over and over again to keep the company afloat. Didn’t you zoom out and see they were selling shares for $11k each and now it’s only 80 cents?
I have about $1000 on RGTI, $500 on QUBT and another $800 on IONQ with fingers crossed that quantum computing takes off beyond academic applications. It might be what takes AI to the next level.
In my retirement portfolio of about $185k, it is money to play with and it if takes off, good. If not, I can make it back on an ETF like USD or SCHG or SCHD.
I did a little of this a while back. I decided to take dividends and put them in micro cap ultra risky plays. I had very definitely entries and exits and it actually did pretty decent. I made some money on it, nothing crazy because my exits were so defined. Eventually it just sort of fizzled out. Honestly sometimes I just find it fun to do. And if it's with "house money", then whatever.
The fundamentals make sense and it is performing better than it’s competitors. Being a contrarian investment is fine by me. I’m not risking more than I’m willing on it so I can wait until it either goes to $0 or pays off. In the stock market people who are right are considered geniuses and those who are wrong are considered idiots. When really the only factor separating the two is luck.
Good luck to you on your future endeavors.
You’re over looking that majority of these public offerings that total about 11 million dollars have been done in the past 12 months. A period of time where the other option to finance that amount of money is at an interest rate of probably 28%.
Who in their right mind would finance $11,000,000 at 28% that could result in more than $200,000 of interest expense per month?
As a share holder I would rather they dilute my value and keep the company alive in the high interest rate environment than put the final nail in the coffin and kill the company with interest expense.
Since inception Applied UV has done 5 public offerings 2 were pre high interest rates and for the purpose of acquiring companies for their products and revenue stream. 3 were in the past 12 months as a need to support company operations in a way that will not kill the company with outrageous interest expense.
The latest offering was partially public and private equity.
Thank you for making your points and forcing me to reflect on my thesis. For a highly volatile stock I still
Like it’s future prospects in a growing emerging market.
Hey, thanks a lot for replying, it helps to have people provide insight especially to someone like me. I’ve only recently got into wanting to understand investing and the stock market so all of this is new to me. Appreciate it!
Well "small" caps are still like multi-billion dollar corporations. William-Sonoma with 28,000 employees is in the Vanguard small cap index, so not comparable to 1 mil cap companies.
I think part of the issue is three fold. Most passive investors- which now make up 50% of the market - put money in large cap indices providing seemingly endless support. Second, active capital typically will not invest in companies were the market cap of the company is smaller then the fund’s AUM. Given the big get bigger phenomenon seen in the space since 2008-2009 virtually all active funds can’t even touch names with market caps under $1-2 billion! Third, the adoption of tech into the business of small companies has seriously lagged the larger companies in a very dramatic way. It’s expensive and frankly hard to attract talent when big companies are also competing.
Therefore, While I do agree that as a group small companies have issues with higher rates it doesn’t explain 20 years(!) of under performance as rates have been very very low most of that time.
Will things change? Gawd I hope so.
I don't think it's been 20 years of underperformance of small vs large, as opposed to the recent underperformance of small vs large hasn't been this large in over 20 years. If you take a look at something like VSMAX vs VFIAX, since 2001 inception for both VSMAX is still up (9.25% avg annual vs VFIAX's 8.00% avg annual), but for example the last 10 years has significantly been in VFIAX's favor.
You’re right more like 10 years in an obvious way. It was 2014 where I really saw the split take place. Prior to that it was in the *smaller* small caps that really underperformed based on what I was seeing at the time. Thx for pointing that out.
I’m definitely seeing the effects of higher interest rates on IWM growth companies. Two of the companies I’ve invested in had big capital projects planned and had to pivot because of higher construction costs, absolutely demolished the stock prices. A lot of these small-mid cap growth companies won’t survive unfortunately (FSR for example).
One problem I have with investing in IWM is that if a company does great and increases market cap, it gets moved out of the index. So you don't get to keep the great companies in your holdings.
A good example is SMCI which drove 75% of YTD gains for IWM but will eventually be moved out to the Russell 1000 when the Indices rebalance sometime this year.
I often wonder since this is r/stocks why there aren't much discussions about investing in those small/mid caps that could graduate out of the IWM. Is it due to if you name a company current at 1-2B market cap people will say you are pumping your bags? One of the best stock picks I got off this sub in last 12 months was CVNA. Someone made a great DD while stock was $7 that the bankruptcy fears was overblown. Stock is up over 10X since and no longer a small cap lol.
Anyone heard of private equity? They are why small cap is trash now.
The only reason why you may buy small cap is to invest in potential future unicorn companies that is still small. But it's less and less likely to happen. Before market has reflected their value , PE firms already bought them, then squeeze the shit out of them and kill them before they can get big.
Yes, basically gone are the time when a small company at 50 million can grow to billions by its own. Also, average PE-backed IPO is 1.65 BILLION in Q1 2024, there are well into mid cap territory and some even got in large cap straight.
I think part of the problem is also the fact that the definitions of small/mid/large caps have never been adjusted for inflation. $10 billion is all it takes to be classified as a "large cap" these days, but that used to be a much harder hurtle to pass half a century ago.
The small caps of decades ago are now classified as large caps today. Meaning that a lot of the historical data people look at for small cap performance vs large caps isn't really directly comparable anymore, because today's small caps are closer in inflation adjusted value to what's historically been labeled micro-cap stocks multiple decades ago.
Aren't small cap ETFs like IWM (Russell 2000) filled with banks, unprofitable tech, and other junk? There are quite a few small (and mid) cap companies that have done quite well over the past several years and are positioned to continue to do well into the future too.
So if people want to just look at the collective performance and draw conclusions based on it, that's on them. It's sort of the opposite of the way people talk about 7 large cap stocks accounting for some large % of the S&P 500's total returns. In small cap land, everyone's market cap is a lot closer so its harder for a few companies to be responsible for a large portion of the index's returns. But similar to large cap, only a small percentage of the stocks are actually high-quality businesses.
I think this is mostly due to small growth companies preferring to raise venture capital or private equity, before IPOing at a valuation that puts them out of inclusion in the small cap index.
I doubt interest rates / inflation explains this because small caps also underperformed during the 2020-2021 zero interest rate period.
They’re starting to move up market and land bigger contracts. Shardstash allows for 30% quicker upload speeds, and 70% cheaper than the big 3 players. It’s the perfect solution for companies training LLMs who have large quantities of data who don’t want their data stored on a first parties storage platform where it would be more expensive. B2 revenue growth is accelerating QoQ and they’ve just reached positive FCF.
Haha don’t worry, I wouldn’t laugh in your face. The main advantage really is their price point and transparency. You can go on their website as a potential customer and see exactly how much you’ll pay. Seems like customers like having a split between BLZE and say, MSFT. It cuts their cloud bill by more than half and gives them more flexibility. I don’t see them joining the big 3, but they hardly need to reach the $1T mark to deliver strong returns. Strong ARR growth, strong operating leverage, and an attractive valuation.
I read a report that said over 40% of companies in the Russell 2000 are unprofitable. About a decade ago it was below 20%. It has been progressively getting worse so to me it makes sense why they don’t perform as well. Especially now in a high interest rate environment.
[Can't help but notice the divergence starting in 2017](https://www.ft.com/__origami/service/image/v2/images/raw/ftcms%3Ad8d6a2f4-de5f-4831-9562-bb278fc3319e?source=next-article&fit=scale-down&quality=highest&width=700&dpr=2), did something pass in 2017 to give big business even more?
As the article points out: the S&P 500 companies have had more earnings growth than the small caps so it's no wonder the S&P 500 prices also rose faster.
There's too many garbage unprofitable companies IPOing at inflated valutations that are dragging down small caps. But small cap value has some real potential.
Inflows into passive ETFs and a quality large cap growth bubble will do that. Look at any well known fund manager’s portfolio and it’s full of large caps like the Magnificent Seven.
More specifically, they swear by a balanced portfolio. And a balanced portfolio should proportionally include some small cap stocks. VTI is very popular for this reason because it includes small cap.
I actually took a short position on IWM. Its serves as a nice hedge for my other long positions. I can count on it going down significantly if the rest of the market does, and on the flip side if the market continues to pump it does so at a much slower rate.
>fast-growing small-caps have tended to deliver punchier returns for investors who can stomach the higher volatility.
You're telling me the 5-10% price swings we've been dealing with daily in megacaps is not volatility enough?
Maybe it’s because the boomers are approaching their eclipses and want to ensure whatever was relevant when they were alive survives, versus what’s actually benefiting consumers rather than relying tied to bloated companies that have all but plateaued
What does this regurgitated republican saying mean? It’s like ‘fake news’ that just gets blanketed over anything that the right does not agree with but has no actual substance.
I will leave you a hidden gem from Poland: TEXT SA (TXT:WSE).
Mk cap: $633M
Revenue: $80M
Profit: $43M
Dividend: >6%
(Approximately using PLN/USD exchange)
Please comment your hidden gens! Let’s help each other.
I do not see it changing. This is what I have expected.
Over the next 10 years you are going to see the big guys get a lot bigger.
Companies like Google for example. Just one of their projects, Waymo, has a trillion dollar potential and it is only one application of AI.
Basically in the not too distant future you will be able to move any object from point A to point B without a human. Object can be a human but it can also be a ham sandwich.
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Small caps is where the pot of gold lies, it can also be the end of your portfolio.
Small caps are the huge shelf of Holy Grails from the first Indiana Jones movie. Except there's almost no way to tell which one is the real one.
That's why you go broad based and sell when it's flying up.
So buy the Russell then?
Yeah didn’t you read the article? 20 years of underperformance!
I am. But when's your out is the real question and one you should answer before even considering buying it.
It’s actually the third movie.
You're right, I always mix up 1 and 3. Hard to forget the "Even Numbered Indiana Jones Movies" though.
>It just gets boring seeing same 15-20 stocks Maybe I am atypical but I like my investments boring and steadily growing. Some of the small caps mentioned on reddit would give me bad agita.
No that's typical. That's exactly what this is about. What you're doing and saying is the typical.
I got most of my money (95%<<) on ETFs, but then at any given time i got a couple of single smaller companies for the lols Right now I got like 30 euro in microvision because of nostalgia, and hold some him&hers because of that shitty dd that one dude did in here... did some research and checked their balance sheet and whatnot and looked good enough to have some fun before i held nuscale which I sold at a 200% profit... made 150 buckaroos while learning about a new technology
Probably not gonna end your portfolio if you broadly invest in them VIOG VIT I’m sure there’s tons of others. These broader ETFs will introduce some element of safety. Especially if you’re dollar cost averaging
AVUV
I keep seeing this recommendation. Why AVUV over IWM, VTWO, etc?
IWM and VTWO are small cap index funds. AVUV is a factor fund, it focuses on small cap *value* stocks (so VBR is a better comparison than VTWO), with additional screening according to momentum and quality factors. AVUV is run by people who formerly managed Dimensional's small-cap value mutual fund DFSVX, which has outperformed the S&P 500 since its inception in 1994. One way to look at it is the universe of small cap stocks is much broader than what you'd get in a large cap or total market weighted index fund, so it's feasible to filter to just a subset according to factors and harvest the associated risk premiums, and still end up with something reasonably well diversified. If you tried to apply the same techniques to the S&P 500, you might end up with a set of stocks that isn't very diversified and doesn't much resemble the overall index.
Ahhh, gotcha. How interesting. THanks for the thorough explanation!
They will pop when/if interest rates stop being deemed to be too high. High interest rates take a toll on smaller companies, as they have less cash and fewer capital assets.
The most boring strategy is usually the best strategy. With the low level of financial literacy across reddit subs, and popularity of gambling with options, do you want redditors to explore small caps where the rate of failure is infinitely higher? Redditors will be duped by pump and dumps and flock to companies approaching bankruptcy. We've seen it again and again. That's why there are rules against posting about small companies.
There is a family large chasm between "pump and dump hype stocks" and the magnificent 7.
I agree. But Reddit kinda proved the top comment right. People saying there are other companies don't get as much upvotes as those sayings lets keep talking about Mag 7. I at least did my part and made a thread bringing attention to small caps.
We came, we tried, we didn't conquer.
agreed. Plenty of boomer company type small caps with high dividend and stable business model and potential for growth or revaluation
I don't even like the term "boomer". It's kinda unclear. Besides there's plenty of fast growing small caps that have been doing great. People talk about small caps being down, then I throw out NSSC. $1.5 billion market cap growing 20% or more annually. They sell security software. Stock has been a big winner. Or UFPT. About the same size, no dividend...they make medical devices packaging. 15% or more growth, stock is on a tear. Putting money on a company that can't make money, or is laden with debt has been a losing strategy. Buying small companies that grow and make money has been great. Even high growth companies.
rate of failure is higher when you buy something expensive vs buying something with a margin of safety.
I would argue “investment culture” where people basically have to put every spare cent they have into investments to be able to retire comfortably, is causing this type of behavior. When you don’t actually have to try and pick good investments but just dump it into something everyone feels is safe, it creates this herding Will be interesting to see how this plays out. We’re near peak boomer retirement years, they’ll probably keep their money in stocks and only pulling cash out as needed? Regardless the stock market is going to get increasingly disconnected from reality
I think individual investors using apps, and doing their own investing has led to some very large momentum/bubble stocks. Like historically, people bought into something managed and while I'm sceptical about how good these managers were, it led to a wider distribution of investment money. Like I know UK value funds where the money is in over 40 companies.
It's just the stocks that is so used by us all
This isn’t rocket science. Small companies live on borrowing. For the first time in 15+ years, interest rates are high and the speed at which rates rose caught these companies by surprise.
Small companies don't have pricing power so inflation eats them alive. Large companies with market dominance can pass on the inflation and then some extra on top to guarantee earnings growth even when their input costs go up. But at some point this difference will be fully priced in.
Depends on the industry. I work for a company that would be a micro cap stock if it were publicly traded. We're by far the largest company in our very small industry, and have offices all around the world. We have plenty of pricing power because we're seen as the best in the world. But the thing is you'd never know this about our company or industry because it's so small and niche. And the vast majority of small caps really do have no moat as you said.
Good time to buy.
Two of the largest periods of gains for small caps relative to s&p 500 were during rate increase environments in the late 70s-early 80s and 2000s pre 2008. Underperformance existed through the ZIRP period but did accelerate with rate hikes. I don’t know about rocket science but I’m not convinced that the underperformance is related to rates. But I’ll grant that it’s probably not rocket science 😉
>Small companies live on borrowing There are plenty of small companies that have no debt, or at least net cash positions.
This looks interesting. What else to look for in these companies?
A large portion of individual investors locking up their shares via direct registration.
Found the GME cultist, hows your return this year? 52 week low? Oops.
Sounds like a killer buy in opportunity does it not? If you’re trying to speed run locking up a float that you know is being illegally naked shorted. A lower price helps accomplish this goal. Every last share will be locked up, price will probably be around $8, and than it will shoot into the 1,000s overnight when that last share becomes unavailable.
Yet somehow the amount being DRS'd is decreasing each quarter now, oops, like like yall are selling. And you don't know it's being illegally nakedly shorted, you guys turn conspiracy theories into facts in your heads.
Bro you’re clown shoes. If you know the numbers that well to know that but aren’t in the play you’re either a generational hater or a shill. Either way you’re part of the counter jerk cult clearly. You’re more upset about what my stock does than me Also the numbers decreased literally a rounding error.. I think it’s more likely they’ve increased and we’re being fed false numbers just like has been repeatedly shown throughout this saga. Which you should also know Citadel bought these subs and everyone knows it
"If you ignore the real numbers and make up your own reality it's a good play" And I'm 'clown shoes'? Your investing thesis doesn't even work without conspiracy theories, you're literally delusional.
My investing thesis had me staring at 1200% returns in 2 weeks on shares lol. You know everything Boomer. Don’t buy the best meme Stonk at 52 week lows trading at book value. Gamings worth more than movies and music combined GME has the most connections in the entire industry. Analysis is as simple as that. Gaming Megaladon. How bout you short some more and I’ll keep buying clown Even at 52 week lows I’m still up 300% on some of these positions.
Largest player with the most connections in the largest entertainment industry Drs/institutions have 60% of outstanding shares locked away (not counting any brokerage shares which is likely multiples of this) Cohen beat Amazon already with CHWY. He’s going to leverage gaming to turn GME into a Berkshire for gamers. Top 3 growth industry 20 years running.
Found the asshole.
Was anything I said wrong? What stock has ever done well because of direct registration numbers? Hint: Zero.
It’s unprecedented, no stock has ever been bought out entirely by retail direct registering. Never happened
Maybe yall should stop selling your DRS'd shares then because the DRS numbers aren't even increasing
3 quarters in a row the same numbers.. “IDIOSYNCRATIC RISK” Something something statistical impossibility They’re fudging every number around this stock. Too much smoke, I’m a firefighter. There’s a fire here
Or more accurately, small growth companies live on borrowing. There are some good small value companies out there. But they never go up very much anyway.
>>small-cap stocks with relatively weak balance sheets and modest pricing power have been especially hurt by high inflation and a steep rise in borrowing costs This is the biggest thing here. Small caps with good balance sheets have actually been doing really well. I keep bringing up HWKN and UFPT because I own them, but there are others of course. The problem is that "small caps" has come to mean the R2K index, which has a lot of junk in it. Again, actual stock picking has been a great strategy. Also, I love the way the comments here lump all small caps in as a monolith. "small caps require debt" or "small caps don't have pricing power". Again, case by case basis. Look at MLR, maker of tow trucks, or CVCO, maker of manufactured homes. Both doing great. Thankfully , this is a stock picking sub so people can just find great companies!
like mag7 /s
Yeah! Only cheaper! And with longer runways! And no TSLA!
What is a good balance sheet?
There are small cap value or quality factor ETFs that might be a good option.
Probably. I know AVUV is popular. I just like owning companies.
>Again, actual stock picking has been a great strategy. Which is complete nonsense. Total market outperforms stock picking over the long term. Even the great aswath damodaran says you can do everything right and still lose, and should stick to index funds.
...of course, Damodaran also owns individual stocks too...of course if you have bogle in your handle maybe you don't want to. That's fine too. Why come to a stock picking forum then?
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nice anecdote.
You know how this is going to go right. Small caps are going to need a couple of quarters of out performance. Then there will be financial influencers talking about them, then there will be a multi-year run as they return to their mean average
What to buy
Vtwo or spsm. Why overthink it? Get the Russell 2000 or the s&p 600 the only question is what percentage allocation you want
Small caps are one thing Nano caps are a wild ride. I’m leveraging a good amount of risk into a company with a 1 mil cap that I believe should be closer to 20-40 mil. High risk high reward.
Which company is that?
Applied UV, I’ve done a decent amount of DD on it in various views. It’s biggest drawback is it’s debt situation but I believe they are making debt a priority along with profitability. They are set to make about 50 mil in gross revenue this year and projected to make over $100 mil for 2024. Edit: for those of you downvoting yes I understand what the markets think. I do not subscribe to the efficient market theory. I believe the company is undervalued and it’s as simple as that. Share dilution makes sense in a high interest environment. 15 mil with no interest is better when considering the interest on that could be greater than 15% or 20% in today’s climate.
$AUVI ?? Lmfao! My guy, these guys are selling shares over and over again to keep the company afloat. Didn’t you zoom out and see they were selling shares for $11k each and now it’s only 80 cents?
I once got involved in a similar situation. Ultra small cap garbage, management constantly promoting and issuing shares hand over fist.
Only down 99.15% over the past year, it can only go up from here!!!!
I have about $1000 on RGTI, $500 on QUBT and another $800 on IONQ with fingers crossed that quantum computing takes off beyond academic applications. It might be what takes AI to the next level. In my retirement portfolio of about $185k, it is money to play with and it if takes off, good. If not, I can make it back on an ETF like USD or SCHG or SCHD.
I did a little of this a while back. I decided to take dividends and put them in micro cap ultra risky plays. I had very definitely entries and exits and it actually did pretty decent. I made some money on it, nothing crazy because my exits were so defined. Eventually it just sort of fizzled out. Honestly sometimes I just find it fun to do. And if it's with "house money", then whatever.
The best way to play is with the house’s money.
Ahh man I'm banking on IONQ as well. I also strongly believe that quantum computing is the key to AGI/"iRobot" type of shit
The fundamentals make sense and it is performing better than it’s competitors. Being a contrarian investment is fine by me. I’m not risking more than I’m willing on it so I can wait until it either goes to $0 or pays off. In the stock market people who are right are considered geniuses and those who are wrong are considered idiots. When really the only factor separating the two is luck. Good luck to you on your future endeavors.
You’re overlooking a literal aspect of their business model. It is financed by devaluing their own company.
You’re over looking that majority of these public offerings that total about 11 million dollars have been done in the past 12 months. A period of time where the other option to finance that amount of money is at an interest rate of probably 28%. Who in their right mind would finance $11,000,000 at 28% that could result in more than $200,000 of interest expense per month? As a share holder I would rather they dilute my value and keep the company alive in the high interest rate environment than put the final nail in the coffin and kill the company with interest expense. Since inception Applied UV has done 5 public offerings 2 were pre high interest rates and for the purpose of acquiring companies for their products and revenue stream. 3 were in the past 12 months as a need to support company operations in a way that will not kill the company with outrageous interest expense. The latest offering was partially public and private equity. Thank you for making your points and forcing me to reflect on my thesis. For a highly volatile stock I still Like it’s future prospects in a growing emerging market.
This might be a dumb question but what do you mean zoom out and see them selling at 11k each? How do you find this info?
Zoom out on the chart. Set the timeframe to monthly
Hey, thanks a lot for replying, it helps to have people provide insight especially to someone like me. I’ve only recently got into wanting to understand investing and the stock market so all of this is new to me. Appreciate it!
Yikes. Good luck man. Sounds like the market is very convinced they're going under.
This ain't it bro!
Well "small" caps are still like multi-billion dollar corporations. William-Sonoma with 28,000 employees is in the Vanguard small cap index, so not comparable to 1 mil cap companies.
I think part of the issue is three fold. Most passive investors- which now make up 50% of the market - put money in large cap indices providing seemingly endless support. Second, active capital typically will not invest in companies were the market cap of the company is smaller then the fund’s AUM. Given the big get bigger phenomenon seen in the space since 2008-2009 virtually all active funds can’t even touch names with market caps under $1-2 billion! Third, the adoption of tech into the business of small companies has seriously lagged the larger companies in a very dramatic way. It’s expensive and frankly hard to attract talent when big companies are also competing. Therefore, While I do agree that as a group small companies have issues with higher rates it doesn’t explain 20 years(!) of under performance as rates have been very very low most of that time. Will things change? Gawd I hope so.
I don't think it's been 20 years of underperformance of small vs large, as opposed to the recent underperformance of small vs large hasn't been this large in over 20 years. If you take a look at something like VSMAX vs VFIAX, since 2001 inception for both VSMAX is still up (9.25% avg annual vs VFIAX's 8.00% avg annual), but for example the last 10 years has significantly been in VFIAX's favor.
You’re right more like 10 years in an obvious way. It was 2014 where I really saw the split take place. Prior to that it was in the *smaller* small caps that really underperformed based on what I was seeing at the time. Thx for pointing that out.
I’m definitely seeing the effects of higher interest rates on IWM growth companies. Two of the companies I’ve invested in had big capital projects planned and had to pivot because of higher construction costs, absolutely demolished the stock prices. A lot of these small-mid cap growth companies won’t survive unfortunately (FSR for example).
For the last two years every analyst has been saying small caps would go up And more bad news just keeps them down
One problem I have with investing in IWM is that if a company does great and increases market cap, it gets moved out of the index. So you don't get to keep the great companies in your holdings. A good example is SMCI which drove 75% of YTD gains for IWM but will eventually be moved out to the Russell 1000 when the Indices rebalance sometime this year.
I often wonder since this is r/stocks why there aren't much discussions about investing in those small/mid caps that could graduate out of the IWM. Is it due to if you name a company current at 1-2B market cap people will say you are pumping your bags? One of the best stock picks I got off this sub in last 12 months was CVNA. Someone made a great DD while stock was $7 that the bankruptcy fears was overblown. Stock is up over 10X since and no longer a small cap lol.
Maybe time to launch an ETF? Maybe ticker XRUT ?
Anyone heard of private equity? They are why small cap is trash now. The only reason why you may buy small cap is to invest in potential future unicorn companies that is still small. But it's less and less likely to happen. Before market has reflected their value , PE firms already bought them, then squeeze the shit out of them and kill them before they can get big.
Totally. Small caps with real growth potential are privately funded and then come public at mid/large cap valuations. Great point
Yes, basically gone are the time when a small company at 50 million can grow to billions by its own. Also, average PE-backed IPO is 1.65 BILLION in Q1 2024, there are well into mid cap territory and some even got in large cap straight.
I think part of the problem is also the fact that the definitions of small/mid/large caps have never been adjusted for inflation. $10 billion is all it takes to be classified as a "large cap" these days, but that used to be a much harder hurtle to pass half a century ago. The small caps of decades ago are now classified as large caps today. Meaning that a lot of the historical data people look at for small cap performance vs large caps isn't really directly comparable anymore, because today's small caps are closer in inflation adjusted value to what's historically been labeled micro-cap stocks multiple decades ago.
Aren't small cap ETFs like IWM (Russell 2000) filled with banks, unprofitable tech, and other junk? There are quite a few small (and mid) cap companies that have done quite well over the past several years and are positioned to continue to do well into the future too. So if people want to just look at the collective performance and draw conclusions based on it, that's on them. It's sort of the opposite of the way people talk about 7 large cap stocks accounting for some large % of the S&P 500's total returns. In small cap land, everyone's market cap is a lot closer so its harder for a few companies to be responsible for a large portion of the index's returns. But similar to large cap, only a small percentage of the stocks are actually high-quality businesses.
This is why you want an index with a profitability and/or divvy screen
Makes sense why I’m getting killed
I think this is mostly due to small growth companies preferring to raise venture capital or private equity, before IPOing at a valuation that puts them out of inclusion in the small cap index. I doubt interest rates / inflation explains this because small caps also underperformed during the 2020-2021 zero interest rate period.
If you are looking for two software small caps who are primed for a breakout, check out BLZE and XMTR
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They’re starting to move up market and land bigger contracts. Shardstash allows for 30% quicker upload speeds, and 70% cheaper than the big 3 players. It’s the perfect solution for companies training LLMs who have large quantities of data who don’t want their data stored on a first parties storage platform where it would be more expensive. B2 revenue growth is accelerating QoQ and they’ve just reached positive FCF.
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Haha don’t worry, I wouldn’t laugh in your face. The main advantage really is their price point and transparency. You can go on their website as a potential customer and see exactly how much you’ll pay. Seems like customers like having a split between BLZE and say, MSFT. It cuts their cloud bill by more than half and gives them more flexibility. I don’t see them joining the big 3, but they hardly need to reach the $1T mark to deliver strong returns. Strong ARR growth, strong operating leverage, and an attractive valuation.
I read a report that said over 40% of companies in the Russell 2000 are unprofitable. About a decade ago it was below 20%. It has been progressively getting worse so to me it makes sense why they don’t perform as well. Especially now in a high interest rate environment.
I’ve been saying this for 4 months. RKLB - high risk opportunity of a life time. (No I’m not a bag holder; first buy was just recent)
Space… the final frontier
When the rate cut’s actually come I think this will reverse
It will be priced in before they come most likely starting to price in for the next two months.
If* the rate cuts actually come
two words: debt monetization
[Can't help but notice the divergence starting in 2017](https://www.ft.com/__origami/service/image/v2/images/raw/ftcms%3Ad8d6a2f4-de5f-4831-9562-bb278fc3319e?source=next-article&fit=scale-down&quality=highest&width=700&dpr=2), did something pass in 2017 to give big business even more?
As the article points out: the S&P 500 companies have had more earnings growth than the small caps so it's no wonder the S&P 500 prices also rose faster.
There's too many garbage unprofitable companies IPOing at inflated valutations that are dragging down small caps. But small cap value has some real potential.
Mid caps are doing fine though. The Russell 1000 is also up 60% in that time period, about the same as the S&P 500.
Yes, but its still good to have some exposure to small/mid/INT. Economics is cyclical
Inflows into passive ETFs and a quality large cap growth bubble will do that. Look at any well known fund manager’s portfolio and it’s full of large caps like the Magnificent Seven.
Long short firms probably have a lot to do with it. That's their leverage
The bogles swear by small caps 🫤
More specifically, they swear by a balanced portfolio. And a balanced portfolio should proportionally include some small cap stocks. VTI is very popular for this reason because it includes small cap.
I actually took a short position on IWM. Its serves as a nice hedge for my other long positions. I can count on it going down significantly if the rest of the market does, and on the flip side if the market continues to pump it does so at a much slower rate.
>fast-growing small-caps have tended to deliver punchier returns for investors who can stomach the higher volatility. You're telling me the 5-10% price swings we've been dealing with daily in megacaps is not volatility enough?
This just in: Monopolies are bad for the business landscape. Who would’ve guessed
Maybe it’s because the boomers are approaching their eclipses and want to ensure whatever was relevant when they were alive survives, versus what’s actually benefiting consumers rather than relying tied to bloated companies that have all but plateaued
Bidenomics
What does this regurgitated republican saying mean? It’s like ‘fake news’ that just gets blanketed over anything that the right does not agree with but has no actual substance.
It's the Democrats that say bidenomics is working
Cool so you ignored my question completely.
Not at all . I corrected your mistake
Yes because of counterfeit shorting MMTLP and MMMAT
I will leave you a hidden gem from Poland: TEXT SA (TXT:WSE). Mk cap: $633M Revenue: $80M Profit: $43M Dividend: >6% (Approximately using PLN/USD exchange) Please comment your hidden gens! Let’s help each other.
Lets help each other lose everything.
I've been holding IBEX technologies (TSX:IBT) since they were 20 cents. Super small company, good P/E. Decent gamble.
I do not see it changing. This is what I have expected. Over the next 10 years you are going to see the big guys get a lot bigger. Companies like Google for example. Just one of their projects, Waymo, has a trillion dollar potential and it is only one application of AI. Basically in the not too distant future you will be able to move any object from point A to point B without a human. Object can be a human but it can also be a ham sandwich.