The bull market rally for the past five years has rewarded those owing such blue chip stocks as Apple (NASDAQ: AAPL), Caterpillar (NYSE: CAT), Coca-Cola (NYSE: KO), ExxonMobil (NYSE: XOM) (chart below), and many others. For the savvy investor, that naturally raises the question of, “It it time to start buying small cap stocks?” Legendary investor Warren Buffett, who is a major shareholder of such mega-caps as Coca-Cola and ExxonMobil has stated that he has learned the most from owning a small cap, See’s Candies.
That could be the case for many other investors, too.
Overall, it appears as if small cap stocks are due for a breakout. As one commentator notes, “Small caps had a heck of a year in 2013, with the S&P 600 Small Cap Index rising by 34% as compared to 25% for the S&P 500. But the asset class has been a dog so far in 2014, falling by 3.4% as compared to a 7.7% rise in the S&P 500.”
It is likely that many investors will start to shift over to small cap stocks for a variety of factors.
A major reason is that many blue chips are stumbling. Recent market action has not been kind to Apple, Caterpillar, Coca-Cola, and ExxonMobil. There are many reasons for that, of course. But a major factor is that some investors are starting to trip their positions.
For that and a wide range of other reasons investors should start to consider small cap stocks.
Many offer all that an Apple or Coca-Cola does, as just example. There are small caps with high dividend yields for income investors. Growth investors and value investors can select from a vast array, too. Finding undervalued small caps stocks is easier as institutional investors cannot buy shares of many due to restrictions in the charters.