What Are Small-Cap Value Stocks, And Which Should You Buy In 2023?

Investors who want higher returns can look into small-cap value stocks since they may outperform the market in the long run.

What Are Small-Cap Value Stocks, And Which Should You Buy In 2023?

Market capitalizations for small-cap stocks range from $300 million to $2 billion. Investors need to be aware of the important benefits and drawbacks of small-cap stocks. Some small caps that are poised to make a positive 2023 include Perion and Norwegian Cruise Line.

Experts recommend diversification when building an investment portfolio to reduce risk and achieve your desired rate of return. Your portfolio should include small-cap stocks, and more specifically small-cap value stock. What is a small-cap stock? How can you identify investment opportunities? These stocks can be classified as small cap and there are many options that you could add to your portfolio. Are you unsure which stocks are small-cap stocks to add to your portfolio? Q.ai has the Emerging Tech Kit. You need to be familiar with the companies you're investing in if you want to invest in small caps. A small cap is a company with a market capitalization of between $300 million to $2 billion. These stocks might be called microcap stocks if they have the lowest market capitalizations.

Small-cap value stocks, on the other hand, are stocks that trade below their actual worth. A stock could trade below its value for a number of reasons, such as poor performance, management changes, or investors losing favor. The stock may outperform if other investors and analysts see the potential to invest in it. A small cap does NOT necessarily mean that the company is new or has just begun. This can sometimes be true, but small-cap companies are often around for a while. These companies have not been able to grow into large-cap stocks based on market capitalization. Small-cap stocks offer investors many advantages. You could enjoy a greater rate of return over the long-term, which is the biggest advantage. Because the company grows more quickly than a mature, large company. A second advantage is the lower pricing. Large-cap stocks tend to have a higher share price due to more investors and a longer history of steady income. Small-cap stocks, on the other hand trade at lower prices due to fewer investors and a less proven track record of revenue and profits.

Why small-cap stocks are more difficult to invest in

For a few reasons, investing in smaller companies with a high market capitalization is more difficult than investing in larger ones.

The companies are not well-known by the general public. People mention Target, Amazon, and Tesla all the times, which means you are aware of their existence and potential investment opportunities. You won't hear about small companies so you need to search for them.

Investment firms often hire analysts to study large companies. You might find that there are very few analysts covering a stock if it is a small company. This can make your job more difficult as you will need to look at the financials to determine if the stock is worthwhile.

You should be ready for greater volatility once you have found small-cap stocks that you want to invest in. These stocks have fewer shares traded, which can cause significant price swings. This is especially true when earnings or company news are announced. Large-cap stocks may not be as volatile because the volume of shares traded would be significant for a large price swing.

There are many ways to invest in stocks with small capital values

You have many options to invest in small-cap stocks. To gain access to this market, investors can choose from any combination of these options.

Stocks by individual

Directly investing in small caps can be the most time-consuming as you have to research and identify companies. This could increase the time it takes to research and invest in the stock.

Mutual funds

A professional management team will do the stock research and stock selections for small-cap mutual funds. This can save you time and money. You also get instant diversification as a mutual fund invests in multiple stocks. This reduces your risk even further.

This convenience comes at a price. A management fee, or expense ratio, is charged by mutual funds. This fee can vary from 0.03% to 2 percent. The fee is deducted from the mutual fund's performance so it is important that you pay attention to the details and find the lowest priced fund.

Exchange-traded funds

Because they can invest in multiple stocks at once, exchange-traded funds look very similar to mutual funds. A management fee is also charged. The management fee is typically lower than what mutual funds charge. ETFs are often index funds and invest according to a benchmark.

If the Russell 2000 Index ETF is tracked, for example, it will contain the same stocks as the index but not in the same weights. The fund may charge a lower fee if the management team isn't actively researching, buying or selling companies.

Q.ai Investment Kit

Q.ai offers an alternative to ETFs: the Investment Kit. These investment kits can be used to invest in multiple stocks at once, similar to ETFs and mutual funds. The difference is that Q.ai kits use artificial intelligence to spot market trends. These trends are used to adjust your investments regularly. This is not something that an ETF can offer.

There are many investment options available. It is best to start with the one that interests you and then go from there.

Stocks with small-cap values for 2023

Here are some small-cap value stocks you might consider that could make 2023 a breakout year. There are no guarantees in investing. You still need to research the stocks and decide if they meet your investment goals.


Perion, a digital advertising company, connects publishers and advertisers. Advertisements will be ever-present as more people are online to work and entertain themselves. This company is unique in its ability to use QR codes in ads and in-game ads during sporting events.

ACM Research

ACM Research is a cleaning company that makes semiconductor wafers. This company could be a long-term winner, with semiconductors used in smartphones, cars, and everything else in between.

Steel Dynamics

Steel Dynamics is a major domestic steel producer and recycler. Steel Dynamics uses electric arc furnaces which are more eco-friendly than other steel producers. With additional infrastructure investment, this green steel manufacturer could achieve greatness.

Norwegian Cruise Lines

Cruise lines were hampered by lockdowns that made it difficult to travel with other people. People will be returning to cruise ships after most countries have lifted lockdowns. Even though stock prices have been falling for the last three years, there could be a turnaround in 2023 and 2024.

APA Corporation

APA is an energy company which explores and produces oil. It aims to do this in a more sustainable, cleaner way. The company aims to produce reliable, affordable energy and reduce emissions. It is present in the United States of America, the United Kingdom and Egypt.

The bottom line

These stocks can be a great way for investors to get involved in new companies. These stocks are more volatile than large-cap stock but offer higher returns.

Before investing, make sure you research small-cap companies. Diversify your portfolio by selecting investments from different sectors. You can also save time by using Q.ai's Investment Kit or ETFs to increase your chances of earning a positive return.