Why Stock Picking Abilities are more Relevant in the Micro Cap Mar

If you analyze the Russell 50 Index (think Dow Jones, but strictly based on the top 50 companies in terms of market capitalization), the top performer was Wells Fargo (WFC) and delivered a little over 40% from January 2009 to June 2009. Now, if you compare this to the top performer of the Russell Micro Cap Index, namely Dendreon Corp (DRDN), a whopping 404% in the same six-month time period, you will start to understand the different growth potential offered by micro cap stocks. Indeed, small stocks like Dendreon are the hot stocks many investors dream of getting in early - notice, though, early in this case would have been a matter of months and not decades, only if one had the access to small stock alerts through a good newsletter!
Furthermore, for the above time period, Wells Fargo does not even make the list of the top ten holdings in the Russell 50 Index. Why? It is hard to think of reaching Exxon Mobil's 330 Billion market cap through any sort of growth. On the other hand, Dendreon Corp, thanks to its stupendous return has become the biggest holding in its own index, as growth is a lot more possible when you are a micro cap stock. It is easier to double or quadruple in millions than in the hundreds of billions.
Also, out of the top ten performances in the large cap index, seven of them were in the financial sector, naturally because of the earlier decimation of the banking and brokerage stocks. In the micro cap index, however, the top ten performers came from varied industries, from biotechnology (DRDN) to retail (Border's Group) to commodities (Uranium Resources).
Lastly, the returns for the large cap index in the same time period was about -6% and for the micro cap stock index was about -2%. The relative out-performance of Dendreon, then, was much more radical than that of Wells Fargo. Same applies to the list of top ten out-performers in both indices - Citigroup was the tenth top performer with a return of 20% and Parlux Fragrances (PARL) with a return of 179%. Indeed, the same applies to the under-performers - a lot more land mines in the small stock universe than in the large cap are (despite today's large bankruptcies).
In the final analysis, when it comes to following micro cap stocks, one has to have the flexible ability to pick the good stocks in any sector without regards to general trends as the micro cap stock index does not at all mirror the good performers. Knowing the right micro cap or penny stock newsletters that follow these small stocks is an essential part of the process that leads to super-charged returns. One such instance is the recommendations of www.hypergrowthstock.com