Small Caps Finance

February 9, 2020    Portfolio Idea Small Caps Finance US

February is finance month over here at build-a-stock-portfolio. And I’m throwing in another favorite of many investors looking for value: small caps.

Small Caps

Small caps stock, is stock for companies with a small market capitalization. Market capitalization or market cap is the total value of all outstanding shares. Take the number of shares and multiply it by the current value of a share.

I’m looking at smaller companies this month.

Many investors think small caps are the way to go if you want to beat the market. Since many of those smaller companies don’t show up in any indices or aren’t on the radar of large investors, there is truth to this theory.

In fact, the numbers support this. However, if you try to calculate in the extra risk that you are taking, the picture is not so clear. There’s a lot of interesting lecture about the trade-offs on the Internet.

On top of that, the exact definition of small cap is a bit variable.

So everything combined. Only investing in small caps may not be the best idea. But mixing them into a diversified portfolio is not a bad idea at all.

Finance

The finance sector is something I’ve largely ignored in my previous portfolios, so it’s time to make a change.

The big financial institutions seem to be struggling with their size and with lawmakers. However, smaller companies tend to have less historical baggage, can more quickly adapt to changing situations, usually are more specialized and have fewer rules to worry about.

Although finance can be a hit and miss and they are under pressure due to the low interest rates, there are still many banks and insurance companies doing just fine. And we haven’t even talked about the fintech companies that are popping up all over the place.

Finance is due for a revival and I expect it to come from the small players.

This Month’s Portfolio

And now for the real portfolio. As always I’m keeping it simple:

  • US based stock.
  • Market cap of $500 million or less.
  • Since finance can also be a risky business, I’m sorting them by cash on hand (Uncle Stock uses a slightly expanded definition, but basically, the number is the amount of money that a company can make available at short term)
Symbol Name Current Price Market Cap Cash
SI Silvergate Capital Corporation 16.23 USD 302.98M USD 1.07B USD
INBK First Internet Bancorp 27.80 USD 277.46M USD 961.14M USD
BHB Bar Harbor Bankshares 23.11 USD 353.22M USD 747.27M USD
MCB Metropolitan Bank Holding Corp. 49.95 USD 417.07M USD 686.11M USD
BSRR Sierra Bancorp 27.73 USD 426.00M USD 680.60M USD
SPFI South Plains Financial, Inc. 21.45 USD 391.13M USD 645.32M USD
CCNE CNB Financial Corporation 29.83 USD 478.89M USD 582.03M USD
FRBK Republic First Bancorp, Inc. 3.29 USD 204.18M USD 581.44M USD
ATLO Ames National Corporation 26.93 USD 246.31M USD 570.41M USD
PBIP Prudential Bancorp, Inc. 17.69 USD 160.00M USD 563.14M USD

Uncle Stock is promising me a historical return of 12%, but with pretty big highs and lows. So I’m looking forward to figure out if next year is going to be a high or a low one.


My philosophy: If you want to invest and your goal is to try to beat the market, you need a system. You need a system that can decide for you what to buy, when to sell and not to panic when things go down. Everything starts with selecting stock. You should not just select random stock here and there based on whims or things you read. No, create a system that suites your style and follow it. These posts give you example of what such a stock selection could look like.

Unless otherwise noted, I do all my research through the Uncle Stock screener. It's a great tool to have in your belt. (note: this is an affiliate link, if you sign up, I get a commision)

Disclaimer: Don't believe anything I say or write. Always do your own research before making any investment decisions.