Lesson 23 of 43 (Small Cap Investing): A Step-by-Step Guide to Picking the Best Small Cap Stocks

  1. Most people consider small cap stocks to be companies with a market cap of less than $2B.
  2. Nearly 75% of all the stocks on the market are small cap stocks, micro cap stocks, or nano cap stocks. Investors often refer to all three of these groups together simply as “small cap stocks.”
  3. Historically, small stocks have performed much better than large stocks (but they have also been more volatile and erratic in their returns).
  4. We walk through a step-by-step guide to finding the best small cap stocks, including screenshots and direct links to a stock screener that’s pre-filtered for high-potential small cap stocks.

Small caps are a very exciting and highly profitable area of the market to invest in.

But finding the best companies among the ocean of small cap stocks can be like searching for a needle in a haystack.

Today we’re going to cover four important questions about finding the best small cap stocks:

  1. What are small cap stocks?
  2. What should you know about investing in small cap stocks?
  3. Which small cap stocks perform best?
  4. How do you find the best small cap stocks to buy? (A step-by-step guide)

 Let’s dig into exactly what small caps are and how to find the best among them.

What Are Small Cap Stocks?

What exactly is a “small cap stock”?

While we often refer to “small cap stocks” as small companies with a market cap of less than $2B, there are actually a few different tiers of small companies:

The true small cap stock definition is companies with a market cap between $300M – $2B. There are currently 1,508 small cap stocks trading in the U.S. (excluding OTC / pink sheet stocks).

Examples of small cap stocks include well known companies such as Tootsie Roll Industries (TR), Papa John’s (PZZA), Bed Bath & Beyond (BBBY), Sonos (SONO), Big Lots (BIG), Abercrombie & Fitch (ANF), Office Depot (ODP), Hertz Global (HTZ), Tupperware Brands (TUP) and many more big name brands.

However, the vast majority of small cap stocks are lesser-known companies such as KMG Chemicals (KMG), Fabrinet (FN), New Age Beverages (NBEV), Forward Air (FWRD), CorePoint Lodging (CPLG), Endocyte (ECYT), and many others.

In order to find the best small cap stocks, you have to keep in mind…

This is just a preview from our free course: How to Invest in Stocks: Learn How to Buy Stocks, Make Money, and Avoid Mistakes
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