Why Small and Mid-Cap Stocks Deserve Your Attention
Why valuations make small and mid-cap stocks an attractive option in a potential recession.
avatar
Staff or Guest writer for The Dog of Wall Street.
2023-01-08 14:31

Are you feeling worried about the state of the economy? Are you considering ditching your small and mid-cap stocks in favor of more stable, large-cap options? Well, fear not my friend! The Head of Securities at Bank of America (SMID Cap Strategy) is here to tell you that small and mid-cap stocks are where it's at, even in the face of a potential economic downturn.
Why Small and Mid-Cap Stocks Deserve Your Attention
Now, I know what you're thinking. "But if I think the economy is about to take a significant downturn, why on earth would I want to own small and mid-cap stocks?" Well, let me tell you, this is a different situation altogether.

For starters, these stocks are already discounting the recession. When you look at their valuation multiples, the forward price-to-earnings (PE) ratio for the Russell 2000 (a index for small-cap stocks) is at levels we haven't seen since the late 1990s and early 2000s. And what happened during that time, you ask? Small caps outperformed large caps by over 100% in the following seven to eight years. Can you say "cha-ching"?

But wait, it gets even better. Small caps have historically been the top-performing asset class in the mid-1970s to early 1980s, even during downturns. So, not only are they cheap right now, they have a track record of doing well during rough economic times. It's like a two-for-one deal, folks.

But what about when the economy recovers, you may be wondering. Won't large caps come out on top then? Well, not necessarily. Small and mid-cap companies are often more agile and able to adapt to changing market conditions, which could lead to stronger earnings growth as the economy improves. Large caps, on the other hand, may not see the same level of growth due to their size and established market positions. It's like the little guy finally getting his chance to shine.

Now, I know what you're thinking again. "Aren't small and mid-cap stocks riskier? Won't I just end up having poor performance?" Well, all investing carries inherent risks. It's important to thoroughly research and carefully consider your own investment goals and risk tolerance before making any decisions. But if you're willing to take on a bit more risk in your portfolio, small and mid-cap stocks may be the way to go in this market.


Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.

Rate this article

positive
negative
Guest
Guest
1 year ago
Agree
0
Published On
2023-01-08 14:31

avatar
About the Author
Staff or Guest writer for The Dog of Wall Street.

buy-coffee
You've read 1 article in the last year
..thank you for supporting us and for visiting our site. Unlike many other sites, The Dog of Wall Street is available for everyone to read. Our focus is to provide great content for free. Do you like what we are doing? Buy us a cup coffee. It is the fuel that keeps us going..

Levi Strauss' Bold Gambit: Is the Denim Icon's DTC Shift Enough to Weather the Storm?
Levi Strauss & Co. boasts a strong quarter with direct-to-consumer growth and innovative fashion, but can it navigate the choppy waters of the retail market?
By Alfonso | 4 months ago

Amazon's Bold Counterattack: Introducing the China-Direct Discount Section
As competition heats up, Amazon unveils a daring new strategy to offer unbeatable prices and direct shipping from China.
By Alfonso | 4 months ago

Tesla's Legal Challenges: Facing the Music on Autopilot Misrepresentation
Court ruling intensifies scrutiny on Tesla's self-driving claims.
By Alfonso | 5 months ago

Netflix's Ad-Supported Triumph: A New Era in Streaming
Surpassing 40 million users, Netflix’s ad-supported plan redefines the streaming landscape.
By Alfonso | 5 months ago

Tesla Stock (TSLA): Look Who's Back!
I’m cautiously optimistic but I’m at the point where I need to see it to believe it.
By Mike Sakuraba | 6 months ago

2 Earnings To Pay Attention to Next Week
Since big tech is the theme, you probably know what I have my eyes on for next week.
By Mike Sakuraba | 6 months ago

2 Stocks to Watch Below $10
Here are two stocks that are currently less trading in the single digits that I believe have some relative upside from their current prices.
By Mike Sakuraba | 6 months ago

Looking Ahead to Tesla's Earnings: What Can We Expect?
Is there any stock that has been more talked about than Tesla (NASDAQ: TSLA) as of late? It’s a company that is always in the spotlight but the stock is under some heavy scrutiny this year and deservedly so.
By Mike Sakuraba | 6 months ago