What are Small Cap Stocks? List and Examples

Small cap stocks are part of the many different kinds of stocks. Additional stock types include blue chip, treasury, penny, common, convertible, noncumulative, participating, preferred, cumulative, growth, dividend, value, etc. Here, our focus shall be on what small cap stocks are. We shall also look at a list of small cap stocks as well as examples of some companies that issue these stocks.

It is well known that every big company; those currently classified as large-cap were once small-cap, therefore, it goes without saying that small cap stocks have the potential to become large-cap stocks too. The classification of a company’s stock as small, mid, or large-cap is dependent on the company’s market cap. It is therefore pertinent to understand what market cap means.

From the above, we can see that the stock price, as well as the total number of outstanding stocks a company has, are what determine its market capitalization. Simply put, the market cap tells the investor what the market thinks the value of the company should be and not necessarily the company’s real value since it does not take the assets and liabilities of the company into consideration.

Market capitalization data for any publicly traded company can be easily obtained on any website that provides stock information in real-time. Organizations that calculate and distribute shares and other asset class indices that provide a benchmark for various sectors otherwise known as index providers also use market capitalization to decide which companies qualify to become part of their benchmark.

The major index providers are:

1. MSCI Inc
2. S&P Dow Jones Indices
3. Bloomberg
4. FTSE Russell

The S&P Dow Jones Indices have an index known as S&p SmallCap 600 which tracks the performance of 600 small cap stocks. Its median market cap as of December 31, 2021 was $1.58 billion

The FTSE Rusell index also has an index known as Rusell 2000 which tracks the performance of 2000 small cap stocks. Its median market cap as of May 6, 2022, was $1.1 billion

Categorizing a company based on its market cap is liable to change over time as what was considered a large cap in the 1900s might be considered a small cap now due to globalization, expansions, population growth, and many other factors thereby making categorization based on market cap quite subjective. Furthermore, it may vary from one broker to another but the generally accepted categories currently are as follows:

Small cap stock list

1. BIT Mining Ltd – ADR
2. Northwest Natural Holding Co
3. Alamo Group, Inc.
4. Monro Inc
5. Listed above are some stocks of companies that are small cap.
6. Lindsay Corporation
7. iRobot Corporation
8. World Fuel Services Corp
9. InterDigital Inc
10. Harsco Corp
11. Hope Bancorp Inc
12. Anywhere Real Estate Inc
13. Cara Therapeutics Inc
14. Hibbett Inc
15. Green Plains Partners LP
16. Enova International Inc
17. NOW Inc
18. Digi International Inc.
19. Cutera, Inc.
20. Astec Industries, Inc

Examples of small cap stocks

Within the table below, we shall take a look at some small cap companies, and their market capitalization amongst other things.

Features of small cap stocks

1. Growth potential.
2. Risky.
3. Volatile.
4. Low liquidity.

We shall have a brief look at the features of small cap stocks. These features are the differentiating factors between them and stocks that are in other categories.

Growth potential

Small cap stocks have the potential to grow, this means the stock price could appreciate especially when the issuing company grows over time through building a good reputation, having a good financial standing as well as expanding its reach.

Risky

These stocks are considered risky since they tend to experience more business uncertainty since their issuing companies are mostly in their early stages.

Volatile

Small cap stocks are liable to rapid increase and decrease in price; which means they are easily affected by market forces. An unstable economy might also spell doom for these stocks.

Low liquidity

Just like penny stocks, these stocks also have low liquidity, which means they might be difficult to sell because they do not trade as frequently as stocks from more established companies.

Small cap vs large cap

We have already taken a look at what small cap stocks are, here, we shall compare these stocks with large-cap stocks. Large-cap stocks are stocks that are issued by companies that are quite well established, usually, their market cap ranges between $10 billion to $200 billion. Apart from the obvious difference which is in their market cap, we shall look at additional differences in the table below.

Small cap vs mid cap

Mid-cap stocks are those stocks whose issuing companies have a market capitalization of approximately $2 billion to $10 billion. Small cap stocks, on the other hand, have a market cap of approximately $300 million to $2 billion making them rank just below mid-cap stocks. Within the table below, we shall further look at some additional differences.

Frequently asked questions

Conclusion

The current mid-cap, large-cap, and mega-cap stocks were all small cap stocks at some point, this goes to show that the current small cap stocks have the potential of growing to become any of these stocks in the future. Investing in small-cap stocks can be rewarding, especially if the company experiences growth. Conversely, it can be daunting if the company fails to grow, it is therefore important to research personally before deciding on what stocks to purchase. Note that there might be less information available on small-cap stocks as compared to the other more established stock types.