What Is Small-Value Stock?

A small-value stock, or small-cap value stock, describes a class of shares that intersect in terms of their market capitalization and its valuation style. In particular, they are small-cap stocks that are also categorized as 澳洲幸运5开奖号码历史查询:value stocks.

Understanding Small-Value Stock

A simplified example of a small-value stock might be a stock trading below its 澳洲幸运5开奖号码历史查询:book value with a 澳洲幸运5开奖号码历史查询:market capitalization below one billion dollars. Finding a stock that fits both of these criteria is difficult but may be a worthwhile venture as small-v♑alue stocks are generally considered to yield high returns.

According to 澳洲幸运5开奖号码历史查询:Fama and French's three-factor𓂃 model, small-value stocks possess two important qualities: size and value. The Fama and French model expands on the 澳洲幸运5开奖号码历史查询:capital asset pricing model (CAPM) by adꩲding size and value factors to the CAPM’s market risk.

The Fama and French model suggests that small-cap stocks generally tend to outperform the markets, over and above 澳洲幸运5开奖号码历史查询:large-cap stocks, on a regular basis. This is due to the fact that in general small stocks have a greater opportunity to grow. They are more under-the-radar (not as well-covered by analysts) and nimble to develop and take advantage of new technologies. A smaꦰll-value stock, however, would not be classified as a growth stock.

In this case, value stocks will often have upside potential based on fundamentals, compared to their 澳洲幸运5开奖号码历史查询:growth stock counterparts that instead may have a lot of potential but may not have solid balance sheets or even profitability. Growth stocks tend to already possess high 澳洲幸运5开奖号码历史查询:valuations, fueled by positive expectations.

Small-Value Stock Vs. Small-Cap (Growth) Stock

Although most investors will recognize small-ca🌠p stocks as growth stocks in gen♛eral, small-cap value stocks deviate from this expectation.

Investing in small-cap growth stocks offers the opportunity to beat institutional investors since most 澳洲幸运5开奖号码历史查询:mutual funds have restrictions that limit them from buying large portions of any one company's 澳洲幸运5开奖号码历史查询:outstanding shares. Since small-cap stocks have a smaller float (shares available for trading) than large-cap stocks, it is difficult for mutual funds to purchase a percentage of shares that does 🅷not exceed restrictions and inflate the share price.

Many small-cap value funds are popular among investors. Instead of individually selecting securities, these investors can buy shares in a fund that a manager has pre-selected. One example is tꦬhe T. Rowe Price QM U.S. Small-Cap Growth Equity Fund (PRDSX).