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.

And so far this year, small caps are again doing significantly better than large caps.

While that fact didn't get the same kind of coverage at the end of last year as, say, Katrina, Iraq, Katrina, Tom and Katie, Katrina, Google, and Katrina in the 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 segments have done over the past 50 years:



Large Caps



Small Caps



*Returns are annualized; Fama and French research portfolios.

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


Large-Cap Growth


Total Market


Large-Cap Value


Small-Cap Value


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 11 companies capitalized north of $5 billion at the beginning of the year and trading on U.S. exchanges that were up more than 100% in 2005, including Google, EOG Resources (NYSE:EOG), Express Scripts (NASDAQ:ESRX), Southwestern Energy (NYSE:SWN), Arch Coal (NYSE:ACI), and Red Hat (NASDAQ:RHAT). It was a good year for energy, obviously.

There were, however, 159 capitalized at less than $5 billion at the beginning of the year that were up more than 100%, including Yamana Gold (AMEX:AUY) and two more highlighted by our Motley Fool Hidden Gems newsletter. (A couple were in the middle of that upward run, to give full disclosure.)

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.