Hiding the Best Small Caps Up Their Sleeves

Ever notice how the same huge stocks seem to dominate the financial news over the long haul?

“FAANG” encapsulates a handful of the biggest, most popular stocks. Everyone seems to own Facebook/Meta (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Google/Alphabet (GOOGL) in some form or fashion.

And the FAANG stocks and other similar ones seem to draw all the coverage. It’s true on broadcast media like CNBC. It’s also true in print, at publications like The Wall Street Journal and New York Times.

Analysts love these enormous, mature companies and their stocks too. For instance, you don’t have to meander far down a video playlist of CNBC’s Mad Money host Jim Cramer to see something about a hugely popular stock.

Beyond the media coverage, these stocks are part of all the major indexes and ETFs. Here is the FAANG stocks’ concentration in the S&P 500:

And in the Nasdaq:

Even within the Vanguard Total Stock Market Index ETF (VTI) – which tracks global equities, holds more than 4,000 stocks, and has almost $266 billion under management – FAANG stocks hold a significant place:

Don’t get me wrong, these stocks have earned their reputations through performance!

But the problem is, they’re mature. Huge gains have already been made by the time many investors latch on to them, meaning big future jumps may not be as likely.

Still, much of Wall Street seems to push these behemoths, whereas smaller, nimbler investors like hedge funds often invest more in smaller stocks.

For instance, these three companies with hedge fund love shot up in short order: SolarEdge Technologies (SEDG), The Trade Desk (TTD), and Paycom Software (PAYC):

Each of these companies also saw attention from institutional investors (what I call Big Money).

Yet you don’t hear pundits screaming about these firms daily. The acronym “STP” refers to oil – or a rock band – not these three stocks.

Another great example is NVIDIA (NVDA). It’s a household name in the semiconductor industry now.

But even just three years ago, NVDA was trading for less than $50 per share (currently around $226). And a decade ago, an NVDA share was less than $5:

You probably hear about the company more often now because it makes great products that apply to many different applications in our modern world.

Some of those uses are flashy, like for metaverses, high-end computing, and video games… so they draw headlines.

In the earlier days, however, mostly just tech folks knew about NVIDIA because of its products. But it’s unlikely any of us heard about it on the morning news’ financial report.

So I’d like to ask Wall Street and the media to shake out the small-cap gems that they’re hiding up their sleeves!

Except the truth is… really, we investors just need to pay attention.

Good data… institutional expertise… and noticing what Wall Street and the media aren’t saying will put us on the road to finding the next NVIDIA… while it’s still a small-cap gem.

I know that’s harder than it sounds.

That’s why I’ve spent decades of my life tracking down how to identify these stocks… ones that may not show up on the front page of the newspaper.

But they’re the ones strengthening their earnings and profits… investing in the future… and growing their businesses.

Even better, we can often spot when Big Money likes what it sees and piles in. Over time, these stocks outperform as a result. I call them “outliers.”

So if you’d like me to help you find these gems… consider checking out Outlier Investor. There, I do all the hard work… and share the promising stocks with outlier potential with my readers. Simply go right here to learn more.

Talk soon,

Jason Bodner
Editor, Outlier Investor

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