“Small-Caps Soar Upward, Leave Large-Caps Behind!

Small cap stocks have always been viewed as a risky investment because of their volatile behavior. However, recent days have seen amazing returns for the small cap sector leaving the large caps in the dust. The S&P 600 Small Cap Index has gained around 10% year to date, outperforming the S&P 500 Index, which is up about 2%. The small cap index has almost doubled the performance of the S&P 500 Index, as large cap stocks have failed to grab the investor’s attention. One of the primary reasons for the rally in the small cap stocks is their neglected valuation. Small Cap stocks are generally overlooked by big institutional investors and hence, are trading at relatively cheaper valuations compared to their large cap counterparts. Another factor that has led to the surge in the small cap sector is the Global economy hitting its peak. Following which, investors are now booking profits in the large cap stocks and investing the same money in the small cap sector. In the current market environment, the Small Cap sector appears to be the obvious choice for investors as cheaper valuation coupled with the scope of higher returns forms the optimal combination for them. Notable stocks that are outperforming the S&P 600 Small Cap Index include Lockheed Martin (LMT) and Align Technology (ALGN). The stocks are up 32.5% and 40.7%, respectively, year to date. Thus, it is clear that investors are latching on to the Small Cap sector as it is providing them the opportunity to gain high returns with comparatively less risk.