Away from the limelight that FAANG stocks and the Nasdaq dominated stocks get, the small-cap shares also had a tremendous run over the last 12 months.
Best Russell 2000 Stocks 2021: For those Indian investors looking to invest in small-cap stocks available in US stock market, the go-to index is the Russell 2000. Away from the limelight that FAANG stocks and the Nasdaq dominated stocks get, the small-cap shares also had a tremendous run over the last 12 months. The Russell 2000 index is up by nearly 100 per cent over the 1-year period. If you are looking to make some big bucks from the gains in the small-cap companies, the Russell 2000 Index is for you.
1. What is Russell 2000 index
Russell 2000 is a part of the Russell US Indexes and primarily represents the small-cap stocks listed in the US stock market. It is an indicator of the performance of the small-cap segment of the US stock market universe. Based on a combination of their market cap and current index membership, the Russell 2000 has nearly 2000 of the smallest companies listed on the index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. Russell 2000 is one such index to go for when you wish to invest in the lesser-known small-cap stocks. The Russell 2000 Index measures the performance of the small-cap segment of the US equity universe.
2. Part of Russell US Indexes
The Russell 2000 Index is actually a subset of the Russell 3000 Index and represents nearly 10 per cent of the total market capitalization of that index. Russell 2000 is a part of the Russell US Indexes and primarily represents the small-cap stocks listed in the US stock market. Russell 1000 Index represents large cap stocks and together with Russell 2000, it forms the Russell 3000 Index. The Russell 2000 Index is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index.
3. Russell 2000 index levels
The Russell 2000 is reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap nature of the index.
As on April 6, 2021, the Russell 2000 was at 2259.15
And, 52-weeks range: 1,133.55 – 2,360.17
Till date in 2021, the Russell 2000 is up by nearly 14.40 per cent as against 8.46 per cent by S&P 500 and 5.36 per cent by Nasdaq 100. Some of the Russell 2000 stocks that have generated over 1000 per cent in 12-months period are – Gamestop Corp, Digital Turbine, Silvergate Capital Corp Cl A, Five Prime Thera, At Home Group Inc, Sm Energy Company, Overstock.com Inc, Pacific Biosciences, Exp Realty International, Novavax Inc.
5. Top ten index stocks, industries
As on February 28, 2021, the top ten companies in the Russell 2000 were Plug Power, Penn National Gaming, Novavax, Caesars Entertainment, Lithia Motors, Sunrun, Darling Ingredients, Deckers Outdoor Corp, Ultragenyx Pharma and Builders Firstsource Inc. The top 5 industries representing the index are – Health Care, Consumer Discretionary, Industrial, Financials and Technology.
What to do
In case, you want to invest in the small-caps, keep a small exposure in it within your portfolio. Some of the shares may be part of the speculation and operator driven stocks where the volatility could be too high to handle. The volatility in small-cap stocks could be higher than large-cap stocks and hence the risk-reward ratio should be considered before investing in them. Small-cap stocks are riskier than large-caps as they are in the growth stage and generally under-researched. Only once they grow in size, they are recognised by the market and enjoy better valuations. But some of these stocks are on a fast-growth trajectory and hence a careful selection of stocks is imminent. Before you decide to invest in small-cap stocks, remember that it should not form the core of your portfolio.
Disclaimer: The investing decision in any stock should be taken on your own after carefully evaluating the business and other fundamentals of the company or after consulting one’s financial advisor. It is not a recommendation to buy, hold or sell in any of the stocks. Financial Express Online does not bear any responsibility for their investment advice.