Latest news with #largecap
Yahoo
3 days ago
- Business
- Yahoo
Prediction: Small-Cap Stocks Will Outperform Large Caps Over the Next 3 Years. Here's Why.
Key Points Small-cap stocks have underperformed their large-cap counterparts for years. The valuation gap between small caps and large caps is the widest it's been since the 1990s. A falling-rate environment could disproportionately benefit small caps over the next few years. 10 stocks we like better than Vanguard Russell 2000 ETF › Small-cap stocks have lagged large caps for years. (Investors divide stocks based on the size of their market cap.) Over the past 10 years, the total return of the S&P 500 large-cap benchmark index has been about 150 percentage points greater than the small-cap benchmark Russell 2000. There are large performance gaps over the past five-year and three-year periods as well, and so far in 2025, large caps are outperforming small caps with total returns of 8% and 1%, respectively. As a result of this long-term outperformance, the valuation gap between large caps and small caps is the widest it has been since the late 1990s. The average S&P 500 component trades for a price-to-book ratio of 5.0, while the average P/B of Russell 2000 stocks is just 1.8. A falling-rate environment could help narrow the gap There are a few reasons why I think small-cap stocks are an excellent investment opportunity over the next few years. For example, investor appetite for speculation seems to be increasing recently. IPOs, M&A, and even SPACs are making a strong comeback. And this favors investment in smaller companies. However, the biggest reason I've been aggressively buying shares of the Vanguard Russell 2000 ETF (NASDAQ: VTWO) -- which invests in 2,000 stocks with a median market cap of $3 billion -- is because I believe we'll see interest rates fall significantly over the next three years, and small caps will be a big beneficiary. For one thing, small caps tend to be more debt-reliant than large caps, and lower interest rates make borrowing costs cheaper. Plus, as risk-free investment opportunities (like Treasuries) fall, more money will flow into the stock market as investors look for better returns, and this also generally favors small caps. Last but not least, the current regulatory-friendly environment could be a positive tailwind for all U.S. companies, but could be especially beneficial to smaller companies, removing roadblocks and allowing them to compete more effectively with their larger counterparts. Should you buy stock in Vanguard Russell 2000 ETF right now? Before you buy stock in Vanguard Russell 2000 ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Vanguard Russell 2000 ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $652,133!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,056,790!* Now, it's worth noting Stock Advisor's total average return is 1,049% — a market-crushing outperformance compared to 180% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 21, 2025 Matt Frankel has positions in Vanguard Russell 2000 ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Prediction: Small-Cap Stocks Will Outperform Large Caps Over the Next 3 Years. Here's Why. was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
12-07-2025
- Business
- Yahoo
Why Paychex, Inc. (NASDAQ:PAYX) Could Be Worth Watching
Today we're going to take a look at the well-established Paychex, Inc. (NASDAQ:PAYX). The company's stock saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$160 and falling to the lows of US$137. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Paychex's current trading price of US$143 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Paychex's outlook and value based on the most recent financial data to see if there are any catalysts for a price change. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. According to our valuation model, Paychex seems to be fairly priced at around 0.9% below our intrinsic value, which means if you buy Paychex today, you'd be paying a reasonable price for it. And if you believe the company's true value is $144.53, then there isn't much room for the share price grow beyond what it's currently trading. In addition to this, Paychex has a low beta, which suggests its share price is less volatile than the wider market. View our latest analysis for Paychex Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. With profit expected to grow by 37% over the next couple of years, the future seems bright for Paychex. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation. Are you a shareholder? PAYX's optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven't considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value? Are you a potential investor? If you've been keeping an eye on PAYX, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it's worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that Paychex has 1 warning sign and it would be unwise to ignore it. If you are no longer interested in Paychex, you can use our free platform to see our list of over 50 other stocks with a high growth potential. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
10-07-2025
- Business
- Yahoo
Prediction: After Datadog's S&P 500 Debut, These Stocks Could Be Next in Line
Given its size and growth, Robinhood looks like a solid candidate to be the next stock added to the S&P 500. Despite recent short reports targeting the company, AppLovin still deserves a spot in the large-cap index. Cheniere should be the next energy stock to join the S&P 500. 10 stocks we like better than Robinhood Markets › Being added to the is a big deal for any company, and usually a boon to its stock. Not only is the venerable large-cap index widely followed by individual investors, but many funds are built to replicate its performance, which results in consistent demand for its components as funds flow into those popular investment vehicles. It also means that whenever a new stock is chosen for inclusion, it tends to get a bump in its price as all of those funds must buy shares for their portfolios. Now, while the index is composed of 500 of the largest U.S. companies, simply growing to that size isn't enough to earn a company entry -- there are other requirements. For example, a company must be domiciled in the U.S., have a plurality of its assets here, and trade on a major U.S. exchange. The index also keeps out master limited partnerships and business development companies, and there are certain minimum requirements for share float. One of the biggest hurdles for entry, though, is that to be added at any given time, a company must have been GAAP profitable both in the prior quarter and over the prior 12 months. Datadog (NASDAQ: DDOG) was the most recent stock to get the nod to join the S&P 500, and the question now on some investors' minds is which stocks could be next. My prediction is that the three most likely stocks to be included next are Robinhood Markets (NASDAQ: HOOD), AppLovin (NASDAQ: APP), and Cheniere Energy (NYSE: LNG). With a market cap of more than $80 billion, Robinhood is one of the largest U.S. companies not in the S&P 500. The financial services and trading platform is solidly profitable, generating $1.95 billion in net income in 2024 and $336 million in Q1 2025. It has been growing quickly, too: In Q1, its revenue soared 50% year over year to $927 million. That growth was driven by its introduction of new products, and the company has been attracting new clients by offering 1% to 3% matching contributions on transfers and contributions to retirement accounts. Its Gold subscription service, which offers a number of perks for just $5 a month, or $50 a year, has also been catching on. Robinhood is introducing artificial intelligence (AI) tools to its platform, including one called Cortex, to help traders navigate the market. It will also add a banking service this fall. Its recent $200 million acquisition of cryptocurrency exchange Bitstamp, meanwhile, expands the company's services beyond retail trading and adds institutional and international clients. Given its size and growth, I view Robinhood as the most likely company to be on the list for S&P 500 inclusion when the index next rebalances in September. AppLovin (NASDAQ: APP) was arguably the biggest snub during last quarter's S&P 500 portfolio adjustment. With a market cap of over $115 billion, it is currently the largest qualifying U.S. company not to be included. It's also solidly profitable, producing net income of nearly $1.6 billion last year and $576.4 million in Q1 2025. Several recent short reports that accused the company of installing apps onto consumers' devices without their permission and citing its alleged ties to China may have prompted the S&P 500 committee's caution last time around. However, a number of high-profile investors own the stock, including Tiger Global's Chase Coleman. Meanwhile, there is no denying that the company is growing quickly. Last quarter, AppLovin's total revenue jumped by 40% year over year to $1.48 billion while its advertising revenue soared 70% to $1.16 billion. The company is currently in the process of selling its legacy gaming app business, which will leave it a pure-play adtech business. Its growth is being led by its AI-powered Axon-2 adtech solution, which gaming apps use to attract new users and more effectively monetize them. The company expects its mobile video gaming segment to grow by 20% to 30% annually over the long term due to industry growth and its own algorithms getting better over time. However, it is currently testing Axon 2 outside its core gaming app segment, and believes e-commerce will become a meaningful contributor to its financial performance in the years ahead. Given its size and growth, I don't think the S&P can continue to ignore AppLovin, despite the short reports. While both Enterprise Products Partners and Energy Transfer are larger energy companies than liquefied natural gas (LNG) giant Cheniere Energy and neither is in the S&P 500, those two don't qualify to be since they are master limited partnerships (MLPs). Cheniere has no such issue. It also has a market cap of over $50 billion and was solidly profitable both last quarter and last year. It benefits from strong and growing demand for LNG. Analysts at Shell recently predicted that the LNG market would grow by 60% by 2040, and Cheniere is currently in the process of expanding its export capabilities. This should lead to solid future growth. Meanwhile, with approximately 95% of its volumes contracted out until the mid-2030s via long-term take-or-pay contracts with global buyers, the company has strong visibility into its future cash flows. Overall, it's a solid company that looks poised to be added to the S&P 500 in the near future. Before you buy stock in Robinhood Markets, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Robinhood Markets wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $687,764!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $980,723!* Now, it's worth noting Stock Advisor's total average return is 1,048% — a market-crushing outperformance compared to 179% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of July 7, 2025 Geoffrey Seiler has positions in Energy Transfer and Enterprise Products Partners. The Motley Fool has positions in and recommends AppLovin, Cheniere Energy, and Datadog. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy. Prediction: After Datadog's S&P 500 Debut, These Stocks Could Be Next in Line was originally published by The Motley Fool Sign in to access your portfolio
Yahoo
10-07-2025
- Business
- Yahoo
1 Small-Cap ETF to Buy Hand Over Fist and 1 to Avoid
Small-cap stocks have dramatically underperformed large caps recently. There could be some excellent tailwinds for small caps in the coming years. Whatever happens, a leveraged ETF is usually a losing strategy to bet on a long-term trend. 10 stocks we like better than Vanguard Russell 2000 ETF › Throughout most of recent history, small-cap stocks have dramatically underperformed their large-cap counterparts. Over the past 10 years, the Vanguard Russell 2000 ETF (NASDAQ: VTWO) that tracks the popular small-cap index has delivered a 106% total return to investors, compared with 257% from the large-cap Vanguard S&P 500 ETF (NYSEMKT: VOO). Small-cap stocks have also underperformed over the past five years, the past three years, and pretty much any other multiyear time interval over the past decade. And so far in 2025, the S&P 500 has outperformed the Russell 2000 by more than seven percentage points. To be sure, there are some good reasons for this. For one thing, we've had two interest rate increase cycles in the past decade, and the benchmark federal funds rate is 400 basis points higher than it was a decade ago. Generally speaking, rising rates can be a drag on all stocks, but disproportionately affect small caps. Plus, the surge in artificial intelligence investment and the strong performance of mega-ap tech stocks has fueled the S&P 500's outperformance for years. Having said that, there are good reasons to think now could be a great time to add small-cap exposure to your portfolio. First, although the timing is uncertain, most experts agree that the likely direction of interest rates will be downward over the next few years. Second, there's a massive valuation gap between small-cap and large-cap stocks right now, and small caps are looking rather cheap. I've been buying shares of several ETFs in 2025, but the one I've been buying most aggressively is the Vanguard Russell 2000 ETF that I mentioned earlier. If you aren't familiar, the Russell 2000 is the most widely followed small-cap index and invests in 2,000 different companies. It's a weighted index, but no stock makes up more than 1% of the assets, so it's nicely diversified. And like most Vanguard funds, it's a very cost-effective way to invest, with a low 0.07% expense ratio. In a nutshell, the Vanguard Russell 2000 ETF is a great way to track the performance of U.S. small-cap stocks over time. If investing in the Russell 2000 is a good idea, investing in an ETF that delivers three times its performance is even better, right? Well, not exactly. The Direxion Daily Small Cap Bull 3X Shares ETF (NYSEMKT: TNA) aims to deliver three times the daily returns of the Russell 2000. So if the index rises by 1% tomorrow, this ETF should rise by about 3%. However, it's important to note that the key word is daily. This ETF is not designed to triple the long-term performance of the Russell 2000. And without turning this into a math lesson, the mathematics of daily leveraged returns aren't favorable for long-term investors. As I mentioned earlier, the Vanguard Russell 2000 ETF has delivered a 106% total return over the past decade. During the same period, the Direxion Daily Small Cap Bull 3X Shares ETF produced a negative 15% total return. Of course, during a short-term bull run, this ETF could be a good performer. In full disclosure, I bought a small position in it after the initial reciprocal tariff announcement sent small-cap stocks plunging in April, but only to hold for a short period. And although I have both of these ETFs in my portfolio, I have roughly 20 times the amount invested in the unlevered Vanguard Russell 2000 ETF. The bottom line is that leveraged ETFs can be useful to take advantage of short-term mispricings, but are generally not suitable for long-term investments. To be clear, I believe that there's an excellent opportunity in small caps right now, but a simple, low-cost index fund like the Vanguard Russell 2000 ETF is the best way to capitalize on it for the next several years. Before you buy stock in Vanguard Russell 2000 ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Vanguard Russell 2000 ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $687,764!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $980,723!* Now, it's worth noting Stock Advisor's total average return is 1,048% — a market-crushing outperformance compared to 179% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of July 7, 2025 Matt Frankel has positions in Direxion Shares ETF Trust-Direxion Daily Small Cap Bull 3x Shares, Vanguard Russell 2000 ETF, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy. 1 Small-Cap ETF to Buy Hand Over Fist and 1 to Avoid was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
10-07-2025
- Business
- Yahoo
History Says the S&P 400 and 600 Indexes Could Be Poised to Soar
Over the last three and five years, large-cap stocks have outperformed small- and mid-cap stocks. The gap between the forward P/Es of the S&P 500 index and the S&P 400 and 600 indexes hasn't been this wide in decades. The last time the valuation gap reached this level, small- and mid-cap stocks made a big move for many years. 10 stocks we like better than S&P 400 Index - MidCap Price Return (USD) › If you've invested your money in the broader benchmark S&P 500 (SNPINDEX: ^GSPC) index over the last five years, then you've done quite well. The index recently registered all-time highs and was up close to 96% over the last five years (as of July 7). A large part of the success can be attributed to a handful of high-flying artificial intelligence (AI) stocks that have reached multitrillion-dollar market caps, effectively putting the rest of the index on their backs. However, value investors who like to go fishing for small- and mid-cap stocks in the S&P 400 (SNPINDEX: ^MID) and S&P 600 indexes haven't fared as well, lagging the S&P 500, especially for small-cap stocks in the S&P 600. Luckily, by some historical metrics, history says this could be about to change. While the five-year charts don't look so bad, the three-year chart is worse, especially for the S&P 600, which gained about 22.5% over the last three years, compared to the S&P 500's 63% gain. In fact, on a forward price-to-earnings basis, the gap between small- and mid-cap stocks and large-cap stocks in the S&P 500 hasn't been this wide in decades, according to Tobias Carlisle, a portfolio manager at the Acquirers Funds. As you can see above, small- and mid-cap stocks have more or less been stagnant over the last 3.5 years. They've faced difficulties from the high interest rate environment, which increases their cost of debt; concerns about a recession; and more recently uncertainty over tariffs and how that might impact their businesses. Carlisle points out that the last time this happened, the S&P 400 and 600 indexes went on to widely outperform large-cap stocks in the S&P 500 for well over a decade -- and he wasn't kidding. There are, of course, different periods of time within this larger time frame that large-cap stocks may have performed better or not underperformed as much, but small and medium caps pretty regularly held a lead. Part of the reason for this could have been the zero interest rate policy (ZIRP) that ensued after the Great Recession in 2008 all the way until the end of 2018. When rates fall and safer assets yield less, investors take more of a risk-on approach, which makes small- and mid-cap stocks more appealing. A ZIRP environment also carries other advantages, like a lower cost to borrow, as mentioned above, and can result in more economic activity. Investors should always keep in mind that while history often rhymes, it rarely repeats itself. That means that while data can be helpful in informing investment decisions, it doesn't predict the future, so there's certainly a chance that small- and mid-caps don't go on to outperform. It seems unlikely that the Federal Reserve will revert to a ZIRP environment anytime soon, unless the economy really struggles, and some are worried about a higher inflationary environment down the line, whether due to tariffs or U.S. fiscal concerns. That said, there are potential tailwinds that could lift small- and mid-cap stocks. The market is forecasting two interest rate cuts in the back half of the year, and some market strategists like Morgan Stanley see the rate cuts accelerating in 2026 -- they are calling for seven next year. Furthermore, at some point, President Donald Trump is likely to finalize tariffs, which, at the very least, will give businesses clarity, even if they are higher than expected. The recently passed U.S. budget reconciliation bill also firmed up tax cuts for corporations that were first implemented in Trump's first term, which could help with growth. Ultimately, I do think the more attractively priced small- and mid-cap groups are poised for a breakout at some point. It's not a guarantee, so don't bet the farm, but having some exposure to this group in your portfolio is a good idea. Before you buy stock in S&P 400 Index - MidCap Price Return (USD), consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and S&P 400 Index - MidCap Price Return (USD) wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $687,764!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $980,723!* Now, it's worth noting Stock Advisor's total average return is 1,048% — a market-crushing outperformance compared to 179% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of July 7, 2025 Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. History Says the S&P 400 and 600 Indexes Could Be Poised to Soar was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
