Renaud Co Blog

Matt Renaud's Financial Blog

Jul 05
2011

Keeping An Eye on Smaller Stocks

Posted by: matt

Tagged in: Untagged 

When it comes to investing, the typical concept of "bigger is better" may not always apply – especially in today's economy. Following the Russell 2500 index shows you that many of the "middle children" in the economic family are actually contenders for doing great things!

The Russell 2500 index reports the activity on small and midsize firms, which has experienced a 150 percent growth since its low in March 2009. Some of these have even shown a higher growth pattern than the larger companies that dominate the Russell 1000. With this growth, the financial market is not only curious as to why the growth has been so impressive, but more importantly – will it continue?

Taking a look at why these firms are doing well, theoretically, is that they've survived the challenges of being a 'start-up' company and likely worked out a few of the bugs in the process to be focused on a growth strategy that is fueling their success. Those invested in these companies also experience a nice return.

As far as their continued growth – well for some, many not be exactly what they thought. Big businesses are also watching their growth. As these smaller-to-midsized companies continue to grow, it's not uncommon to see these firms being acquired by larger companies seeking to add a quick boost their bottom lines. Right now, with the ability to borrow money cheaply, bigger firms have become seasoned shoppers.

The moral of this story is that big or small, profit is impressive; however, it's still the quality of the performance that will always prevail.