7 Big Reasons to Love Small-Cap Stocks (and a Way to Invest Today)

It’s been the giant, large-cap stocks that have led the market rally this year, with household names like Meta Platforms (META) and Nvidia (NVDA) climbing 144% and 197%, respectively.

But we’re always one step ahead in our investing, finding opportunities that Wall Street is sleeping on – and small-cap stocks are now on our moneymaking radar.

These are companies that have market caps between $250 million and $2 billion, and their businesses are usually at an earlier stage of growth, making them more agile – with more room for expansion and innovation.

Their shares usually trade for just a few bucks apiece, allowing them to rocket higher and faster than your average “Blue Chip.”

And that explosive growth potential is part of what makes these “hidden gems” of the stock market so exciting as investment opportunities.

When a small-cap stock succeeds in delivering a hit product or service, it can deliver a “moonshot-style” payoff to shareholders; but the key is knowing the right ones to invest in… because not all of these companies will “grow up” and be worth your money.

Our consumer insights machine is particularly adept at spotting these kinds of small-cap, big-profit winners.

With a real-time pulse on what brands and products are winning over consumers, we can see the smaller players gaining momentum before they’ve even hit Wall Street’s radar.

And we can act on those opportunities – and share them with you here – before the rest of the market piles in and sends their stock prices soaring.

As if “explosive growth potential” wasn’t enough of a reason to love small-cap stocks…

Let me show you six more big reasons individual investors should be investing in small-cap stocks – and a way you can invest today…

Small-Cap Stocks, Big Profit Potential

• No. 1: Explosive Growth Potential

We already covered that, so let’s keep moving…

• No. 2: Limited Institutional Attention

Institutional investors often focus on larger, more established companies due to liquidity and investment size requirements. This leaves a gap in the market, allowing individual investors to find undiscovered small-cap stocks that institutions have overlooked – and creates opportunities for folks like you to buy stocks at favorable valuations.

• No. 3: Flexibility

Smaller companies tend to be more adaptable compared to their larger counterparts, with less red tape to work through and more room to innovate. This flexibility allows them to pivot quickly in response to changing market dynamics and industry trends.

For individual investors, that agility can translate into potentially higher returns as small-cap companies adjust their strategies to capture emerging opportunities.

SoFi Technologies (SOFI) was able to achieve this when the student loan segment of its business took a hit. And look how it’s doing now: Consumer Happiness is through the roof… and its stock price has doubled since the start of the year.

• No. 4: M&A and Takeover Potential

Small-cap stocks can be attractive targets for larger companies looking to expand their portfolios or gain access to innovative technologies. This makes small-cap stocks more likely to be involved in merger and acquisition (M&A) activities, potentially leading to significant gains for investors who hold these stocks when the deal is struck, should their shares get bought at a premium.

• No. 5: Portfolio Diversification

Diversification is a cornerstone of successful investing, and small-cap stocks offer an excellent opportunity to achieve it. The low correlation between small-cap and large-cap stock performance can provide a buffer against market volatility. And by adding small-cap stocks to a portfolio that includes larger, more stable stocks, investors can reduce overall risk and enhance potential returns.

Pair a “Steady Eddie” stock like Costco (COST) that’s returned 137% over the last five years with a $2 “moonshot bet” like this one that’s gained 120% over the last five months, and you’re setting yourself up for serious profits.

• No. 6: Access to Niche Markets

Small-cap stocks often operate in specialized or niche markets that are not adequately addressed by larger companies. These niches can include innovative technologies, emerging industries, or underserved market segments.

Celsius Holdings (CELH), for example, found its niche in the energy drink market with a “healthy” alternative that’s taken the world by storm. And investors have been rewarded handsomely.

Investing in small-cap stocks gives individual investors exposure to these unique opportunities that might not be available through larger, more diversified companies.

• No. 7: Under-Covered by Analysts

Large-cap stocks often receive extensive coverage from financial analysts, resulting in efficient pricing and limited information arbitrage opportunities.

In contrast, small-cap stocks typically receive less attention from analysts, leaving individual investors to conduct their own research and uncover hidden insights – what we do best. For investors willing to put in the time and effort to analyze these companies, that’s a huge advantage.

Having LikeFolio’s predictive insights in your corner – and a team of experts hand-picking the best opportunities of the bunch? Well, that’s even better. Because you now have a secret weapon…

The AI-driven investing tool that Landon and I built to tell us what stocks to buy and when has identified five small-cap stocks with explosive growth potential.

Each of these picks is a company harnessing artificial intelligence in one way or another, everything from voice recognition technology to supercharged streaming to enhanced financial services.

Each is registering as a flashing “buy” in our system with a Social Heat Score over 70.

And each, we believe, has the potential to more than triple in price within the next year.