CHRS - 2 Top Small-Cap Stocks to Buy in December
Are small-cap stocks poised for a breakout? That's what some analysts and hedge fund managers are arguing.
The idea is that passive investing, or tossing a bunch of money into an index fund and forgetting about it because you have better stuff to do, is driving a wedge between small companies and their larger counterparts. That's because index fund managers must allocate money to correlate with the proportional representation of the benchmark they're trying to replicate, such as the S&P 500. That means many index funds are buying more and more shares of the Amazons and Facebooks of the world while leaving out companies with lower market valuations, which are less likely to be included in market benchmarks.
If that's true, and you stop and consider the trillions of dollars wrapped up in passive investing, then it suggests that the value of many assets is being inflated due to the popularity of passive investing -- and that small-cap stocks are being overlooked and undervalued. That might give individual investors a nudge to increase their exposure to smaller companies. Here's why Personalis (NASDAQ: PSNL) and Coherus BioSciences (NASDAQ: CHRS) are worth a closer look in December.