Here's a bit of news about last year that hasn't got that much play this year (because it's such old, old, old news): Small caps had a better year than large caps. Again.
And value stocks outperformed growth stocks. Again.
While that fact didn't get the same kind of coverage as, say, Katrina, Iraq, Katrina, Tom and Katie, Katrina, Google, and Katrina in last month's year-end reviews, it's worth pausing to note anyway.
The value of small caps
Let's take a quick look at how the returns of these various segments have done over the past 50 years:
|
Value |
Growth |
|
|---|---|---|
|
Large Caps |
13.7% |
10.2% |
|
Small Caps |
17.5% |
9.0% |
The total market return during this time was 10.8%.
What does that amount to in terms of a $5,000 investment over 50 years? Let's run the math:
|
Small-Cap Growth |
$366,705 |
|---|---|
|
Large-Cap Growth |
$634,070 |
|
Total Market |
$858,609 |
|
Large-Cap Value |
$3,002,216 |
|
Small-Cap Value |
$16,084,472 |
2005 was the year of the small cap, again. Sure, there are lots of large caps that had a great year. Running a quick screen, I found 18 companies capitalized north of $5 billion and trading on U.S. exchanges that were up more than 100% in 2005, including Google, Peabody Energy
There were, however, 190 capitalized at less than $5 billion that were up more than 100%, including NatusMedical
So next year, like this year, and the many, many years that preceded it, will in all probability be a good one to add small-cap value stocks to your portfolio.
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This article was originally published on Dec. 22, 2005. It has since been updated.
Bill Barker loves to sniff out small-cap value. He does not own shares of any company mentioned in this article. The Fool has a disclosure policy.
