It’s hard out here for a small cap. Despite being the primary driver of job growth in this country, Wall Street’s smallest firms have the most trouble getting the public markets to work for them. Aside from the tremendous costs associated with being a public company, small- and microcap companies have to further deal with an increasing lack of attention. Despite offering the biggest potential returns, smaller companies tend to be shunned by large and small investors alike because of the perception that small- and micro-cap stocks are too risky.
At the core of this issue is a lack of information. Sure, smaller companies generally carry more risk for investors and display more volatility, but they more than balance that out with the potential for much larger returns than exist in larger, more established companies. When part of a balanced, diversified portfolio, they can be invaluable. But they also lack the sort of prolific and detailed research reports that are usually readily available for larger public companies. Even for investors interested in taking on a little more risk in search of big returns, doing so without having access to the sort of expert opinions and research analysis they’re accustomed to is a non-starter.