Forbes investing contributor Brad Thomas points out Cabot Network’s long-time independent investing perspective and recent Small-Cap Confidential article to bolser thier point about making small-cap companies part of your investment mix.
Noting Tyler Laundon’s Valentine’s Day article “A Small-Cap Stock Warren Buffett Would Like Now,” Thomas discusses the fact that smaller-cap companies “have more room to run” and therefore “offer the opportunity for greater profits.”
In the Cabot article, Tyler looks back to 1999 when Warren Buffett made an obscure statement:
“If I was running $1 million today, or $10 million for that matter, I’d be fully invested … It’s a huge structural advantage not to have a lot of money … The universe I can’t play in has become more attractive than the universe I can play in. I have to look for elephants. It may be that the elephants are not as attractive as the mosquitoes. But that is the universe I must live in.”
Buffett was saying he can’t buy small-cap stocks (the mosquitoes) because he has too much money. He would move the stock too much. He must “look for elephants,” which are, of course, the slower-moving large caps.
Tyler, and ultimately Forbes, show three examples of great performing, small cap stocks. But the case is also made at how small cap volatility can be maddening. Especially these days.
Read the full Forbes article here.