O'Shaughnessy's Tiny Titans Screen

by Cara Scatizzi

O'Shaughnessy's Tiny Titans Screen Splash image

There are many proponents of investing based on market capitalization. James O’Shaughnessy is one of those proponents. We introduced four stock screening strategies in 2006 based on his book “Predicting the Markets of Tomorrow: A Contrarian Investment Strategy for the Next Twenty Years” (Portfolio, 2006). The book discusses market-capitalization trends and investment cycles that O’Shaughnessy believes last about 20 years.

The best-performing strategy of the group is called Tiny Titans, which focuses on low-price micro-cap stocks. Much research has been done regarding the success of investing in this market-cap category. AAII’s Shadow Stock Portfolio is based on a study that showed that small and micro-cap stocks tend to outperform the overall market over long periods of time.

O’Shaughnessy believes the reason for this outperformance is that few analysts follow these small stocks. In addition, many institutional investors and mutual funds cannot trade these stocks without moving the price due to the relatively small number of outstanding shares. This leaves room for surprises, which can lead to a performance “pop.” O’Shaughnessy also says that micro-cap stocks have a low correlation with the overall stock market, making them a potential hedge in a portfolio of larger-cap stocks.

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Cara Scatizzi is a former associate financial analyst at AAII.


Discussion

Blah from Idaho posted over 3 years ago:

I cannot view


John from Michigan posted over 2 years ago:

Is there a new listing of these companies that were originally listed in the June Journal. I am referring to the tiny titans. Thanks


Jean from Illinois posted over 2 years ago:

The Tiny Titans is tracked in our Stock Screens area, where a new list of passing companies is posted each month:
http://www.aaii.com/stock-screens/screendata/OShauTinyTitans
-Jean, AAII


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