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Conversely, many of the overlooked small and mid-cap companies at the turn of the millennium were trading at less than typical multiples simply due to being the ‘out of favor’ group. Their stocks, as a group, have been superb performers as noted on this 10-year chart from the Jan. 23, 2011 Wall Street Journal.
While the chart only shows the Mid-Caps versus the S&P 500, the body of the WSJ article noted that the S&P Small-Cap 600 was recently within 3% of its all-time peak set in July 2007.
From 2000 – 2010:
| Index | Cum. Performance (including Div.) | Outperformance |
| S & P 500 | 14.1% | N/A |
| S& P 400 (mid-caps) | 72.0% | 410.6% |
| S & P 600 (small-caps) | 77.2% | 447.5% |
For 2010 only:
| Index | Cum. Performance (including Div.) | Outperformance |
| S & P 500 | 15.% | N/A |
| S& P 400 (mid-caps) | 26% | 73.3% |
| S & P 600 (small-caps) | 27% | 80% |
Credit Suisse Group notes that the relative outperformance has now pushed the average P/Es of the smaller companies to 17x versus the large caps average of 14x. That may set the stage for a reversal of trend going forward.
Dr. Paul Price www.BeatingBuffett.com www.OptionsProfits.com
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How does that indicate that large cap is cheaper?
Large cap average of 14x means fairly valued to slightly overvalued?