A previous
article on Benzinga detailed why Warren Buffett’s favorite investment
was not a multi-billion stake in a blue chip like American Express (NYSE: AXP), IBM (NYSE: IBM)
or Wells Fargo (NYSE: WFC),
but the $25 million purchase of See’s Candies.
Buffett
has stated you learn more from the operation of a small business like See’s,
which operates a chain of candy stores. According to the most recent Kiplinger’s magazine,
investors can also earn more while learning more from small cap holdings.
The
article by Nellie S. Huang, “The Top Small-Cap Funds,” reports that,
over the past 15 years, “the Russell 2000 Index of small companies has
gained an annualized return of 8.1 percent. That beats Standard & Poor’s
500-stock Index of large companies by average of 4.0 percentage points per
year.”
For
individuals, there are many fine small companies you can follow, that will help
hone your investing skills.
Like
See’s, a company it does not have to be publicly traded: it just has to be one
of the best at executing its business model. Two of these were mentioned in
previous articles on this site: Pay Per Cloud, and TheOfficialBoard.
Pay
Per Cloud goes toe-to-toe with much larger high tech firms, and many times
prevails for projects involving cloud computing networks. For the
vital due diligence functions, TheOfficialBoard is ideal as it provides
information on corporate executives.
There
are many smaller firms in interesting and lucrative niches.
A
recent Benzinga article reported on the bullish
long term outlook for Collector’s Universe (NASDAQ: CLCT),
which appraises items. SoupMan (OTC: SOUP)
is a small cap food company from another piece on Benzinga with celebrity
appeal — as it comes from the classic “Soup Nazi” episode of
the legendary “Seinfeld” comedy series. The allure of SoupMan is
solidified by its quarterly revenue growth of 39.40 percent, according to
Yahoo! Finance.
American
Express, IBM and Wells Fargo are great companies. So are many
smaller entities such as See’s Candies, Pay Per Cloud, SoupMan,
TheOfficialBoard and many others. Investors would do well to follow many of
these firms, whether publicly traded or not.
As
Buffett has clearly demonstrated by his success, there is much to be learned
from the sector with the bigger returns, even though the companies are smaller.
Read more
Benzinga.com small-cap articles: http://www.benzinga.com/news/small-cap
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article was posted with the permission of a third-party contributor
and the opinions contained therein do not necessarily reflect
those of Smallcappower. Smallcappower does not endorse any investment
advice provided by these third-party contributors. Please consult
your investment advisor before making any investment decisions.
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