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The Unsung Heroes of the Stock Market Today

By Dan Caplinger – Sep 27, 2021 at 5:34PM

Key Points

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Forget well-known companies and focus on this niche of the market.

The stock market was mixed on Monday, with stock market investors having very different reactions in varying parts of the business world. The Dow Jones Industrial Average (^DJI -0.61%) rose as old-economy areas of the stock market performed well. However, losses for the S&P 500 (^GSPC -1.11%) and Nasdaq Composite (^IXIC -1.68%) reflected worries about certain high-growth areas of the market.

Index

Percentage Change

Point Change

Dow

+0.21%

+71

S&P 500

(0.28%)

(12)

Nasdaq

(0.52%)

(78)

Data source: Yahoo! Finance.

Largely ignored in Monday's stock market action, however, was the influence of small-cap stocks. The Russell 2000 index of small-caps soared almost 1.5% on Monday, and that reflected the enthusiasm that investors have about the smaller businesses that play such a huge role in the health of the broader U.S. economy. Below, we'll take a closer look at what was behind the big move in small-caps today.

Gathering energy

One area in which small-caps did especially well on Monday was in the energy sector . With 4% of the Russell 2000 made up of energy stocks, the influence isn't huge, but it's larger than the proportional impact on the S&P 500.

Notable movers in energy included Southwestern Energy (SWN -2.86%), Contango Oil & Gas (MCF), and Comstock Resources (CRK). The stock jumped between 14% and 22% on the day.

In turn, the rise for these stocks came from a surge in natural gas prices. Natural gas futures jumped more than 10% on Monday, climbing above $5.70 per million British thermal units (BTUs) and reaching their best level in more than seven years. Stockpiles of natural gas are unusually low as the weather begins to cool in the Northern Hemisphere, and some experts are now worried about the potential for shortages. Given the supply disruptions that many areas of the economy have suffered over the past 18 months, those worries seem perfectly justified, and any further problems such as hurricanes or other major weather events could trigger much larger, panic-driven moves in natural gas.

A recovering industrial economy

Another place where small-caps are bouncing back is in the sectors that took the biggest hits during the pandemic. As an example, shares of AerSale (NASDAQ: ASLE) soared almost 16% on Monday as investors continued to gain confidence about the aftermarket aviation parts specialist that came public through a special purpose acquisition company (SPAC) in 2019.

Person working on an aircraft engine.

Image source: Getty Images.

AerSale got crushed during the initial stages of the pandemic as activity within the airline industry came to a standstill. However, things have bounced back considerably for AerSale. Last month, the company reported second-quarter revenue that doubled from year-earlier levels. AerSale said that airlines were seeking to recommission aircraft that they had previously idled, and that led to a massive gain in maintenance work during the period. The company reversed a year-ago loss with a respectable profit, and it sees conditions in the industry continuing to improve for the remainder of 2021 and beyond.

You can see similar examples picking up ground elsewhere in the Russell 2000 today. As long as Main Street economies can get back on their feet, small-cap companies that serve those communities will benefit.

Think small

It's easy to focus on the mega-cap behemoths of the business world. But if you do, you can miss out on some great opportunities. If you want to find the best growth opportunities, think small -- and look for the small-cap companies that will become the behemoths of tomorrow.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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