Small Cap Stocks
Small Cap stocks are generally those companies with market capitalization's of $300 million to $ 2 billion. The capitalization of a company is figured by multiplying its stock price by the number of shares it has issued, or shares outstanding. The Index in the stock market that measures theses smaller capitalization stocks is the Russel 2000. This index is comprised of the 2,000 lowest-capitalization stocks. The Index serves the purpose of providing a good standard for investors who are primarily attracted to smaller-capitalization stocks, that may have better potential for high growth. Stock investing in Small Capitalization stocks is considered riskier than in Large Cap stocks. By their nature, smaller companies are less proven. They sometime lack the proper financing or proper management experience. However, precisely because of their size, they can deliver results of which larger companies are rarely capable.
At one time, Large Cap giant's like Microsoft, were once a start-up small cap company.
In his book How To Make Money In Stocks, Bill O'Neil outlines his canslim system, using the Breakout Trading method. And what's the best small cap stock list, with all the hot small cap stocks? I personally use The Pitbull Investor, which coupled with it's Stock Screener, does all the small cap stock research for you.
The stock market does not escape this general principle. The law of supply and demand is more important than all the analyst opinions on Wall Street. In other words, big is not always better A Large Cap stock with 300 million shares outstanding is hard to budge up in price because of the large supply of stock available. On the other hand, if a company has only 30 million shares of stock outstanding, a reasonable amount of buying can push the stock price up rapidly because of the small available supply.
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