![]() ![]() It says that the element of risk is not significantly higher in the micro-cap world when compared to small-cap stocks. The report debunks another myth that has played a key role in the overall market shift away from micro-cap stocks. The report said that micro-cap managers generate more returns than small-cap managers, “with top-quartile, median, and even bottom-quartile micro-cap managers outperforming their small-cap peers over multiple historical time frames.” Are Micro-Cap Stocks More Risky than Small-Cap Stocks? The Oberweis report then goes on to compare small-cap stocks and micro-cap stocks to prove that micro-cap stocks have performed better than small-cap stocks. Of course, increasing volatility, rising inflation, the start of a bear market, rising interest rates and geopolitical tensions had a role to play here, but the overall market shift away from micro-cap companies is clearly visible over the past several years. The report shares that in 2012, an average small-cap manager allocated nearly 53% of their portfolio to companies with market caps under $1.5 billion. That’s because these funds prefer to allocate most of their resources to large companies in a market that is quickly becoming a “winner take all” industry.Ī report from Oberweis Asset Management paints a similar picture where investors are gravitating towards mid- or large-cap stocks. It says that the micro-cap space has been seeing less and less involvement and participation from large institutional funds. The report highlights a very important trend here. An active micro-cap strategy outperformed in 66% of all trailing 12-month periods and 84% of all trailing 3-year periods over the past 17 years. According to a report from HighVista Systematic Strategies, from 2003 to 2020, on average, micro-cap stocks have outperformed Russell 2000 Index by 1.75% per year (arithmetic average return). However, long-term and wise investors know that endless opportunities could be found in the small- and micro-cap universe. Amid too much volatility everyone seems to avoid small companies that are working on disruptive products or services which are yet to show their true effects or results. ![]()
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