Just curious how like really, really small cap stocks do in huge bear markets. Like penny stocks or stock close to them.
Part of me thinks that they would do the worst - they are probably in general more marginal companies whose best hope to really turn profits is an extremely favorable economic environment.
But another part of me thinks that they actually might do better than medium and large cap stocks because their offered products/services are likely much more narrow than bigger companies, so their success or failure is based more on narrow question of how that product or service does, and much less so on the overall economic environment. If you got a super-small cap biotech company whose business is riding on the success or failure of a drug that, if it gets approved, it will undoubtedly sell hugely as it cures or lessens the effect of some horrible disease, whether that stock goes up or down is going to be VERY highly correlated to the question of whether that drug gets approved or not, much less so to the general economic and stock market environment.
Thoughts?
Thanks!
Part of me thinks that they would do the worst - they are probably in general more marginal companies whose best hope to really turn profits is an extremely favorable economic environment.
But another part of me thinks that they actually might do better than medium and large cap stocks because their offered products/services are likely much more narrow than bigger companies, so their success or failure is based more on narrow question of how that product or service does, and much less so on the overall economic environment. If you got a super-small cap biotech company whose business is riding on the success or failure of a drug that, if it gets approved, it will undoubtedly sell hugely as it cures or lessens the effect of some horrible disease, whether that stock goes up or down is going to be VERY highly correlated to the question of whether that drug gets approved or not, much less so to the general economic and stock market environment.
Thoughts?
Thanks!