That’s great news for investors who already own positions in this arena, but not so good news for those who don’t.
The performance run-up in small-caps has made them fairly pricey as far as valuation goes. The price-to-earnings ratio of the Russell 2000 is above 18, exceeding its long-term average of 14.9, according to Bank of America.
Considering that domestic turmoil has simmered down for now, you can expect small caps—which are most prone to volatility when things sour—to continue their journey higher.
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Underappreciated and oversold
The trick is finding bargain small-caps; companies that haven’t kept pace with their counterparts because of being oversold and underappreciated by investors. Stocks in this category have some catching up to do, and now might be the time to buy at very low prices.
Two of the following three companies are technically oversold according to the Relative Strength Index or RSI. It measures momentum on a scale of zero to 100. If a stock’s reading falls below 30, it is considered oversold.
Here are three bargain small-cap stocks with big potential: