When it comes to small-cap investing, it can be difficult to hit a home run. However, mid-cap exposure can make for hittable plays, giving investors an opportunity to get exposure to companies that may have a higher chance of breaking through the large-cap ceiling.
“Recognizing those future winners when they are still in the small-cap phase is extremely challenging,” a Motley Fool article said. “However, they can be a bit easier to spot once they’ve become mid-cap stocks, with market caps in the $2 billion to $10 billion range. Obviously, nobody can guarantee any such company will lead its industry segment or become a multi-bagger.”
Mid-caps also offer the ideal blend of performance and stability. Because they’re better capitalized than their small-cap brethren, they can withstand economic downturns better while also seeing upside when markets rally.
Short-term traders can also capitalize on mid-cap rallies. This is made possible using the Direxion Daily Mid Cap Bull 3X Shares (MIDU), which seeks daily investment results equal to 300% of the daily performance of the S&P MidCap 400 Index.
Leveraged funds can provide traders with strategic exposure to niche corners of the market like mid- and small-caps without having to use a margin account to maximize gains. However, only seasoned market players should utilize them.
A Small-Cap Option
Small-cap stocks aren’t behind mid-caps in the current market rally, as seen in the performance of the Russell 2000 index. It’s up almost 13%, but it could make a larger move if the second half of 2023 continues to see additional upside.
Short-term traders can track this move with the Direxion Daily Small Cap Bull 3X Shares (TNA). The fund tracks the Russell 2000 Index, which seeks daily investment results equal to 300% of the daily performance of the index.
The tide could turning for small-caps after relative underperformance amid rising interest rates and high inflation. They could be in a price range that’s conducive to value seekers.
“About 88% of unusually large volume purchases in domestic equities from June 1 through June 28 went into small caps according to MAPsignals, after 1,512 buy signals for equities under $50 million,” Financial Advisor noted. “Despite many advisors’ indifference to small-caps, the category’s valuations are currently below their 25-year averages, while large-caps’ are well above theirs.”
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