Small-Cap Growth Stocks

“A small-cap is generally a company with a market capitalization of between $300 million and $2 billion. The advantage of investing in small-cap stocks is the opportunity to beat institutional investors through growth opportunities. Small-cap stocks have historically outperformed large-cap stocks but have also been more volatile and riskier investments.” - Investopedia

Add the word growth, and that makes the small-cap growth stocks those that expect fast growth (in earnings, sales, book value, and cash flow) with high valuations) ratios high, dividend yields low).

Hence, the operative words are “volatile” and “riskier.” Furthermore, “fast growth” is what we are going for here.

The Exchange Traded Fund (ETF) Vanguard Small-Cap Growth (VBK), as of April 30, 2021, has 647 stocks in its basket. VBK is a great choice for investors looking for solid exposure to the US small-cap growth market. 99.94% of its country holdings is in the U.S with only 0.06% Canadian. The top five sectors within the ETF are Technology, Healthcare, Industrials, Consumer Cyclicals, and Financials. Of course, keep in mind that the stocks in this ETF and within this sector are not the big tech ones like Microsoft or Apple. These are the potential highflyers that are expected to grow quickly in earnings and sales.

VBK, which began trading in 2004, rose with the market until the 2008 financial crisis. However, since the spring of 2009, VBK has been in a monstrous uptrend. During the pandemic in 2020, it fell with the market once again, yet has held a key 6-year monthly moving average, which has kept the uptrend intact.

In 2021, the year-to-date return is 2.83%. VBK made an all-time high in February 2021 at 304.93 and currently trades between 275-280.

As of last Friday, VBK’s price rose, ending the week higher and outperforming the S&P 500. This puts not only this ETF but several other stocks in its basket in focus should the market remain solvent. In a strong bull market, we would rather put our money here than in the classic mega-cap stocks as the profits can come swiftly with huge percentage gains.

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Disclaimer: The information provided by us is for educational and informational purposes. This information is based on our trading experience and beliefs. The information on this website is not ...

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