Artificial intelligence doesn’t appear to be going anywhere, which is why stock in companies that stand to benefit from the technology’s rise continues to shine. Microchip giant Nvidia has been the banner name, having returned an eyewatering 1,904% over the past five years.
But while Nvidia and the A.I. revolution have dominated headlines, you’d have earned more by investing in cosmetics firm e.l.f. Beauty. Over the same period, the stock returned 2,491%.
Those invested in cloud computing company Super Micro Computer did even better, with a return of 4,175%. And energy drink maker Celsius Holdings posted a half-decade return north of 5,300%.
If you haven’t seen much of these stocks in financial headlines, you’re not alone. Nvidia’s meteoric rise has made it one of the most valuable companies in the world. It’s now the third-largest stock in the S&P 500, trailing only Microsoft and Apple.
Celsius, Super Micro Computer and e.l.f., meanwhile, still aren’t big enough to be among the market’s largest 500 companies. That means they’re not only less likely than bigger stocks to be covered by the press, but also less likely to be in your portfolio if it’s centered around the S&P 500 or similar large-company stock indexes.
In fact, all three stocks have market capitalizations, which is the share price times shares outstanding, that classify them as mid-cap. That’s a portion of the market that analysts at S&P Dow Jones Indices call a “sweet spot.”
“For the most part, mid caps have consistently outperformed large caps over various timeframes,” including both sustained up and down markets, the analysts say in a note.
Why smaller stocks tend to outperform larger ones
It’s not hard to picture how small companies can have a growth advantage over large ones. A stock that costs $1 a share needs to get to $4 to realize a 300% return. Imagine what it would take for a large, financially mature company like Microsoft to quadruple in size.
That’s why investors who are looking to boost…
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