How big are micro cap stocks?
Key Takeaways. A micro-cap is a stock with a market cap of between $50 million and $300 million. Micro-cap stocks tend to have greater volatility, thus are inherently riskier, than larger-cap stocks.
Understanding Microcap Stocks
While SEBI hasn't officially provided a definition for microcap stocks, stocks that are falling outside the top 500 in terms of market capitalization are usually referred to as microcap stocks. Typically, these enterprises have a market cap of under Rs 5,000 crore.
Small-caps and micro-caps are often considered riskier than their larger counterparts, primarily because they tend to be newer, less established companies. Just getting started on their long-term journey, they might have fewer resources, less access to capital markets, and less-experienced management teams.
Small-cap stocks are shares of companies with total market capitalization in the range of about $300 million to $2 billion. Small-cap companies have the potential for high rates of growth, making them appealing investments, though their stocks may experience more volatility and pose higher risks to investors.
The companies ranked from the 251st position onwards in terms of market capitalization are known as small-cap companies. The market cap for these companies is below Rs.5000 crores. The mutual funds that hold stocks from the small-cap are called 'Small-cap funds'.
Although small-cap stocks generally carry greater risk than the stocks of large companies, risk cuts both ways. Small-caps are more likely to lose value during a recession, but the attractive upside potential in bull markets makes them worth the risk for many investors.
Investing in microcap stocks offers advantages such as high growth potential, diversification opportunities, undervalued prospects, and accessibility. However, there are also disadvantages, including higher risk, lack of transparency, market manipulation, and the potential for scams and fraud.
Low-priced securities are often known as “microcap stocks” or “penny stocks.” Generally, microcap stocks are stocks issued by companies with market capitalization of less than $250 to $300 million. Penny stocks are typically stocks issued by very small companies that trade at less than $5 per share.
What are some warning signs of microcap fraud? Be wary if the company's stock seems to be more heavily promoted than its products or services.
Over time, micro-cap managers generate higher returns than traditional small-cap managers, with top-quartile, median, and even bottom-quartile micro-cap managers outperforming their small-cap peers over multiple historical time frames.
What is the fastest growing small-cap stock?
| Company | CMP (Rs) | Sales CAGR (3 yrs, %) |
|---|---|---|
| AMANI TRAD | 382.1 | 1,272.2% |
| BRONZE INFRA | 1.0 | 1,119.9% |
| BALU FORGE | 227.4 | 1,070.7% |
| MODERN CONVERTERS | 99.9 | 929.9% |
- Indian Energy Exchange Ltd.
- Central Depository Services (India) Ltd.
- Aptus Value Housing Finance India Limited.
- Five-Star Business Finance Ltd.
- ICICI Securities Ltd.
- Easy Trip Planners Ltd.
- Eris Lifesciences Ltd.
- CE Info Systems Ltd.
| Stocks | Mkt Cap(CR) | Change |
|---|---|---|
| Jio Financial Services | 230,624.22 | 5.85 |
| Ambuja Cements | 138,211.84 | -6.10 |
| HDFC Life Insurance Company | 133,045.51 | -5.35 |
| Vedanta | 113,915.76 | 8.10 |
As we step into 2024, we believe U.S. small-caps look compelling. Underowned: Small-caps now represent just 4% of the broader U.S. stock market versus the long-term average of nearly 8%. This low percentage has occurred only twice before, in March 2020 and back in the 1930s.
Many see the small-cap index as undervalued compared to historical norms while also noting it hasn't fully joined the market rally as megacap tech stocks have. In December, Fundstrat head of research Tom Lee noted that he sees megacap tech stocks still holding up well in 2024 but not outperforming small caps.
Peoples Financial Services Corp. is an example of a micro-cap companies stock traded in NASDAQ. It was founded in 1905 and is headquartered in Pennsylvania, USA. The market capitalization. It is computed as the product of the total number of outstanding shares and the price of each share.
Most Microcap stocks are traded on the "over-the-counter" (OTC) market rather than on a major securities exchange. They are quoted on over-the-counter (OTC) platforms like the OTC Bulletin Board (OTCBB) or OTC Link LLC (OTC Link).
Mid-cap: $2 billion to $10 billion. Small-cap: $250 million to $2 billion1. Micro-cap: $50 million to $250 million. Nano-cap: Under $50 million11.
As small-cap businesses expand, their stocks offer a higher growth potential compared with larger companies. But that comes with a greater risk of volatility — including more (and bigger) fluctuations in stock prices and earnings reports.
| S.No. | Name | CMP Rs. |
|---|---|---|
| 1. | Advani Hotels. | 87.50 |
| 2. | Nicco Parks | 146.20 |
| 3. | Castrol India | 209.20 |
| 4. | CMS Info Systems | 412.70 |
What are the hottest penny stocks right now?
- BTG2.820.12% B2Gold Corp.
- NYCB3.250.18% New York Community Bancorp, Inc.
- TLRY2.850.44% Tilray Brands, Inc.
- DNN2.220.10% Denison Mines Corp.
- SNDL2.500.46% SNDL Inc.
- ESPR3.120.24% Esperion Therapeutics, Inc.
- EEENF0.010.00% 88 Energy Limited.
- CXAI4.940.46% CXApp Inc.
Individual small-cap stocks offer higher growth potential, and small-cap value index funds outperform the S&P 500 in the long run. Small caps also experience higher volatility, and individual small companies are more likely to go bankrupt than large firms.
The largest Micro-cap ETF is the iShares Micro-Cap ETF IWC with $909.38M in assets. In the last trailing year, the best-performing Micro-cap ETF was FDM at 18.73%. The most recent ETF launched in the Micro-cap space was the First Trust Dow Jones Select MicroCap Index Fund FDM on 09/27/05.
| Company Name | LTP | % Change |
|---|---|---|
| Kanani Industries | 4.3 | 4.88 |
| Dynamic Cables Ltd | 409 | 2.08 |
| Hilton Metal Forging | 131.65 | 2.29 |
| Alok Industries | 28.8 | -1.71 |
Over the past 11 recessions, small caps have beaten their larger cousins by over 16% during the 12 months after a recession started. Consider the periods before and after the dot-com crash.
