Engines of Growth: Little Small-Caps That Could

Tickers in this article: CAW MTDR SOUP ^RUT

NEW YORK (BestCredit) -- Recent decisions at the Federal Reserve to phase out its quantitative easing stimulus programs have given markets an indication that the economy has stabilized and is ready to begin working on its own without external monetary support. These decisions at the U.S. central bank have been reaffirmed by an improving labor market and GDP growth rates that have risen to 3.2% in Q4 2013.  

This bodes well for 2014. 

It also creates an environment where investors can start to look beyond the safest stocks and sectors and instead start building exposure to areas that can generate longer-term growth. Generally speaking, investors will look to the Russell 2000 as a way of gauging the performance of small-caps in relation to their better-known (and more commonly traded) counterparts in the Dow Jones Industrials and the S&P 500.  

Small-Caps vs. Large-Caps

In 2013, the Russell 2000 gained more than 38%, once capital gains and dividends are counted. The S&P 500 generated roughly 32.5% during the same period, while the Dow Jones Industrials offered returns of under 30%.

Part of this difference can be explained by the fact that small-cap companies tend to generate most of their business domestically. In contrast, large-caps get a lot of their business overseas, and international stocks have trailed the U.S. in recent quarters. These trends suggest that small-caps continue to offer excellent opportunities for growth.

Let's look at two choices for investors looking to gain exposure to this type of asset. 

SoupMan: "More Soup for You!"

One well-positioned selection is SoupMan (SOUP) , which is trading toward the bottom end of its 52-week range. SoupMan first gained major exposure in the "Soup Nazi" episode of Seinfeld.