Rampaging Elephants
The theory is that small capitalization stocks offer great rewards. After all, as Jim Slater pointed out in The Zulu Principle: “elephants don’t gallop”. Well, apart from when they’re being chased by a psychopath, armed with an elephant gun, in a bulldozer. As the last few years have shown, even behemoth sized corporations can grow startlingly quickly if they’re priced to go bust and then get bailed out by obliging governments.
Still, the idea that smaller cap companies offer outsized rewards is hard to shake. To the extent that share price grows with earnings then it ought to be easier to double the price of a small company than a large one. Which is, more or less, true. The only trouble is that it’s probably more likely you’ll see it sink to zero.
The theory is that small capitalization stocks offer great rewards. After all, as Jim Slater pointed out in The Zulu Principle: “elephants don’t gallop”. Well, apart from when they’re being chased by a psychopath, armed with an elephant gun, in a bulldozer. As the last few years have shown, even behemoth sized corporations can grow startlingly quickly if they’re priced to go bust and then get bailed out by obliging governments.
Still, the idea that smaller cap companies offer outsized rewards is hard to shake. To the extent that share price grows with earnings then it ought to be easier to double the price of a small company than a large one. Which is, more or less, true. The only trouble is that it’s probably more likely you’ll see it sink to zero.
