“Small” in this context refers to market capitalization — as in small-cap stocks like the kind found in the Russell 2000 Index. These stocks aren’t so big that it takes huge buying interest to move the needle, which often is the case with many Dow Industrial and/or S&P 500 stocks. Nor are they too tiny — e.g., they are not microcap stocks, as that class is generally susceptible to huge volatility.
The small-caps I like are basically Goldilocks in stature, meaning their size is just right for delivering big portfolio gains.
Of course, finding the right small-cap stocks — those capable of big upside, but not full of risk — isn’t an easy task. You have to find companies with solid fundamentals, outstanding growth prospects, and ones that are seeing strong buying interest by professional money. These three factors are what I look for in small-caps, as they are critical elements that can keep these small fish swimming up any market stream.
Here are three of my favorite mighty mites that could keep delivering strong gains in 2013: