About U.S. exchange traded micro cap stocks

Introduction

There are 1,000+ stocks of U.S. companies that are traded on U.S. stock exchanges that are very small in size and that are usually referred to as "micro cap" or "microcap" stocks. Very little attention is paid to them by the news media and most institutional investors. The purpose of this article is to provide an overview of U.S. micro cap stocks so that you can understand them better, and also to provide some background as to why so little attention is paid to them.

Note that this article is not focused on the 1,000+ stocks of U.S. companies that are traded over-the-counter ("OTC") and that are mostly micro cap stocks. For information about OTC micro cap stocks, you can read about OTC stocks and list of U.S. otc stocks.

Overview of U.S. micro cap stocks

As explained in our article about the U.S. stock market, the U.S. stock market is dominated by the 500+ common stocks of well known large American corporations like Wells Fargo, Coca Cola, GE and Home Depot. These are often called "large cap" stocks because they have a total market capitalization greater than $10 billion. The term "market capitalization" reflects the total value of a company's stock, using the current market price of the stock. So if a company has 1,000,000 shares of common stock, and those shares are trading on the stock market at a price of $10 per share, that company has a market cap of $10,000,000.

U.S. common stocks are typically categorized into one of four categories based on the size of their market capitalization. There is no set rule, but we follow a set of guidelines that are fairly common:

You can read more in our article size categories.

Here is a summary of the U.S. common stocks in our database based on these size categories:

CategoryStock CountTotal Market Cap%
Large cap555$33,474,170,996,74986.87%
Mid cap837$3,800,350,943,6539.86%
Small cap1,233$1,109,695,607,4262.88%
Micro cap1,360$151,242,034,8940.39%
Unknown1$00.00%
Total3,986$38,535,459,582,722100.00%

The above data should be an accurate picture of the U.S. stock market as of yesterday. Our database is updated automatically in the middle of the night by various data feeds, so our database should be complete. Note that a stock is included in the category of "unknown" when we don't yet have market cap data for a stock. This typically occurs with a stock that just went public, and our data providers haven't yet included the stock in their data feed.

Let's look at the typical size of the micro cap stocks:

Market CapStock CountTotal Market Cap%
$100 - $200 million414$60,311,496,22539.88%
$200 - $300 million243$59,525,239,18339.36%
< $100 million703$31,405,299,48620.76%
Total1,360$151,242,034,894100.00%

Micro cap stocks by GICS sector

In the investing world, there is a lot of discussion and analysis of stock market "sectors" or even "sectors of the economy". Every stock is analyzed to determine what part of the economy or "sector" the business operates in. The sector classification system is important to investors because during different time periods, the different sectors of the economy and therefore the sectors of the stock market perform quite differently. For example, a grocery market chain is not going to be as affected by a recession as a seller of luxury goods. So during different phases of the economic cycle, certain sectors of the economy and therefore the stock market will perform better than others. During stock market down turns, many investors will shift their focus to "safer" sectors like the utilities sector. So a lot of effort goes into analyzing stock market performance based on sectors.

As explained in our article stock market sectors, there are three competing sector classification systems in use today. On our website, we have chosen to primarily adopt the GICS system. The GICS system was invented by two of the largest stock market index providers, MSCI and S&P. Under the GICS system, all common stocks are classified into one of 11 sectors of the economy.

Here is a summary of the U.S. micro cap stocks in our database by GICS sector:

GICS SectorStock CountTotal Market Cap%
Financials315$41,542,409,88627.47%
Health Care360$39,641,009,85526.21%
Consumer Discretionary133$14,856,263,1539.82%
Information Technology161$14,393,763,3439.52%
Industrials132$13,767,149,3239.10%
Energy90$8,074,982,5705.34%
Real Estate42$4,927,118,0083.26%
Communication Services41$4,378,894,9972.90%
Materials39$3,982,844,4962.63%
Consumer Staples34$3,337,724,4022.21%
Utilities8$1,607,063,6141.06%
Unknown5$732,811,2470.48%
Total1,360$151,242,034,894100.00%

The thing to note here is that micro cap stocks have a different sector makeup than large cap stocks, for two reasons:

Micro cap stocks are dominated by stocks in the Financials sector for two reasons: the U.S. has a large number of small regional banks that are publicly traded and because of a large number of shell companies (see the list of micro cap stocks by industry below). A shell company is a newly formed company that raises money by selling stock to the public in order to eventually buy, or enter into a merger with, an existing operating business. Shell companies are like venture capital firms, except that shell companies usually end up buying just one company, rather than investing in a bunch of different companies like a venture capital firm.

Micro cap stocks are dominated by stocks in the Health Care sector because the U.S. has a very active biotechnology research industry. Research to discover new drugs and/or medical treatments is very expensive and speculative. There are hundreds of small biotech companies that raise money by selling stock to the public, many of whom have little or no revenue as they are formed to pursue research. Investors are eager to buy stock in these companies because the rewards can be great if one of these companies comes up with the next great cure for cancer, but investing in these companies is very speculative as it is very difficult for an investor to know or even make an educated guess as to which one of these companies will actually succeed.

Micro cap stocks by industry

The prevalence of regional banks, biotechnology companies and shell companies can be seen by looking at micro cap stocks by industry classification. On our website, we have adopted the Morningstar system of classifying all companies into one of 150 industries, as explained in our article list of industries. Here is a summary of the U.S. micro cap stocks in our database by industry:

IndustryStock CountTotal Market Cap%
Biotechnology227$26,811,732,82617.73%
Banks—Regional179$23,854,079,29515.77%
Shell Companies67$10,490,064,8616.94%
Medical Devices44$3,900,738,3452.58%
Oil & Gas E&P43$3,832,739,2902.53%
Software—Application37$3,151,359,0282.08%
Drug Manufacturers—Specialty & Generic30$2,833,519,4131.87%
Communication Equipment25$2,656,160,4711.76%
Oil & Gas Equipment & Services28$2,434,631,1491.61%
Diagnostics & Research25$2,419,334,2811.60%
Medical Instruments & Supplies16$1,965,805,8451.30%
Restaurants19$1,929,803,3151.28%
Specialty Business Services16$1,666,729,3791.10%
Specialty Retail14$1,564,061,2991.03%
Apparel Retail12$1,395,348,0280.92%
Semiconductors12$1,335,055,0460.88%
Advertising Agencies11$1,333,912,3710.88%
REIT—Mortgage12$1,297,641,3050.86%
Electronic Components15$1,286,721,3360.85%
Credit Services12$1,277,167,0080.84%
Telecom Services8$1,224,153,3730.81%
Information Technology Services15$1,205,565,0440.80%
Specialty Industrial Machinery10$1,149,567,7040.76%
Rental & Leasing Services8$1,115,490,8480.74%
Scientific & Technical Instruments10$1,111,437,8410.73%
Capital Markets9$1,107,291,3300.73%
Staffing & Employment Services11$1,021,553,1080.68%
Metal Fabrication6$1,014,209,6130.67%
Education & Training Services5$1,002,094,1940.66%
Health Information Services7$998,862,0140.66%
Internet Content & Information8$968,246,1630.64%
Engineering & Construction9$940,933,7910.62%
REIT—Retail8$939,665,6200.62%
Consumer Electronics7$935,442,6370.62%
Aerospace & Defense10$873,926,1780.58%
Real Estate—Development5$873,177,7610.58%
Utilities—Regulated Water4$841,740,1680.56%
Asset Management11$822,748,5920.54%
Broadcasting9$814,298,1430.54%
Insurance—Property & Casualty10$802,221,8470.53%
Farm Products5$800,114,1830.53%
Marine Shipping5$798,167,4850.53%
Industrial Distribution5$782,004,3350.52%
Footwear & Accessories5$772,844,4880.51%
Furnishings, Fixtures & Appliances8$767,648,3630.51%
Leisure8$766,441,0650.51%
Computer Hardware9$750,898,9180.50%
Entertainment6$733,698,5920.49%
Medical Care Facilities9$731,508,6810.48%
Auto Parts9$730,861,6860.48%
Specialty Chemicals10$722,860,2810.48%
Software—Infrastructure8$704,808,9200.47%
Building Products & Equipment5$704,191,1090.47%
Semiconductor Equipment & Materials8$685,263,4010.45%
Other Industrial Metals & Mining6$676,955,2350.45%
Packaged Foods11$675,812,7770.45%
Thermal Coal6$673,243,6270.45%
Mortgage Finance6$668,774,8200.44%
Security & Protection Services9$668,027,4150.44%
Pollution & Treatment Controls6$638,164,0290.42%
Household & Personal Products6$618,335,1950.41%
5$606,277,1370.40%
Home Improvement Retail2$552,922,7050.37%
Utilities—Regulated Electric2$536,585,0040.35%
Insurance—Specialty4$510,309,6860.34%
Electrical Equipment & Parts11$500,307,4790.33%
Internet Retail6$495,398,5480.33%
REIT—Hotel & Motel6$486,686,3970.32%
Resorts & Casinos3$481,267,8870.32%
REIT—Diversified5$477,623,7370.32%
Luxury Goods4$477,450,8270.32%
Steel5$477,033,5440.32%
Conglomerates3$473,567,2040.31%
Real Estate Services6$473,287,1700.31%
Apparel Manufacturing8$455,409,3540.30%
Uranium3$443,434,3140.29%
Oil & Gas Midstream3$442,502,4010.29%
Trucking4$437,334,6620.29%
Waste Management8$436,982,6080.29%
Publishing4$429,276,5020.28%
Beverages—Non-Alcoholic3$425,608,4570.28%
Insurance—Life3$413,916,6650.27%
Insurance—Reinsurance3$406,855,2280.27%
Textile Manufacturing4$405,171,5180.27%
Farm & Heavy Construction Machinery4$391,167,1120.26%
REIT—Residential2$379,227,8130.25%
Gold4$375,792,5630.25%
Agricultural Inputs4$373,130,2270.25%
Coking Coal2$364,290,7320.24%
Residential Construction3$355,562,2970.24%
Consulting Services2$326,172,7770.22%
Auto & Truck Dealerships4$314,966,8670.21%
Integrated Freight & Logistics4$306,962,7660.20%
REIT—Office2$295,411,3480.20%
Beverages—Brewers1$291,615,8760.19%
Gambling4$291,573,8680.19%
REIT—Specialty2$265,525,9940.18%
Business Equipment & Supplies1$255,726,4150.17%
Financial Data & Stock Exchanges1$247,726,7070.16%
REIT—Industrial2$243,150,0780.16%
Chemicals2$235,346,3400.16%
Real Estate—Diversified3$225,329,4320.15%
Oil & Gas Refining & Marketing3$215,960,3040.14%
Recreational Vehicles1$211,240,2340.14%
Utilities—Regulated Gas1$191,932,0290.13%
Tools & Accessories5$191,205,3180.13%
Railroads2$189,827,5720.13%
Utilities—Independent Power Producers1$186,031,8280.12%
Electronic Gaming & Multimedia3$170,851,4260.11%
Solar4$154,674,8710.10%
Electronics & Computer Distribution3$147,125,1940.10%
Lodging2$122,604,2680.08%
Airlines1$108,037,8570.07%
Travel Services2$101,323,1420.07%
Auto Manufacturers1$100,778,4750.07%
Oil & Gas Integrated1$93,864,2200.06%
Pharmaceutical Retailers2$75,973,5050.05%
Other Precious Metals & Mining1$65,433,7200.04%
Beverages—Wineries & Distilleries2$44,289,8450.03%
Food Distribution1$40,897,1670.03%
Other1$35,403,9530.02%
Grocery Stores1$26,167,6300.02%
Lumber & Wood Production1$25,830,2070.02%
Personal Services1$21,113,1800.01%
Confectioners1$19,408,4480.01%
Utilities—Diversified1$17,644,0060.01%
Oil & Gas Drilling1$16,416,3840.01%
Paper & Paper Products1$14,257,4000.01%
Total1,360$151,242,034,894100.00%

ETFs that buy micro cap stocks

One reason that micro caps aren't heavily discussed could be that micro caps are not included in very many of the most common U.S. stock market indexes. This becomes important because there are a lot of exchange traded funds, or "ETFs", and mutual funds that are "index funds" -- they make investment decisions simply by buying the stocks in the index they are setup to track.

There are a handful of ETFs that we have categorized on our website as "total market" ETFs -- i.e. they buy, or attempt to buy, most if not all U.S. stocks on the stock market:

SymbolDescriptionInception DateMarket capActions
ITOTiShares Core S&P Total U.S. Stock Market ETF01/20/200427,084,384,000Analyze
IWViShares Russell 3000 ETF05/22/200010,124,310,000Analyze
IYYiShares Dow Jones U.S. ETF06/12/20001,318,984,500Analyze
SCHBU.S Broad Market ETF11/03/200915,987,820,000Analyze
SPTMSPDR Portfolio Total Stock Market ETF10/04/20003,669,767,852Analyze
VTHRVanguard Russell 3000 ETF09/20/2010615,073,500Analyze
VTIVanguard Total Stock Market ETF05/24/2001155,069,467,101Analyze

However, if you look at the stocks these ETFs are holding, they usually don't include all micro cap stocks. This is partly explained by the popularity of the Russell 3000 Index, an old, widely followed index that includes the 3,000 largest U.S. stocks based on market capitalization. The number of U.S. stocks varies every day, but right now, the Russell 3000 includes only 400 or 500 micro cap stocks.

There are a handful of ETFs that focus on micro cap stocks:

SymbolDescriptionInception DateMarket capActions
IWCiShares Micro-Cap ETF08/12/2005772,864,500Analyze
FDMFirst Trust DJ Select MicroCap ETF09/27/2005114,191,550Analyze
DWMCDorsey Wright Micro Cap ETF07/10/20182,256,000Analyze

However, if you look at the stocks these ETFs are holding, even though the word "micro cap" is in their names, these ETFs generally include a heavy allocation to stocks that we classify as small cap stocks rather than micro cap stocks. As explained above, there is no standard definition of a micro cap stock. Using our definitions, these micro cap ETFs actually invest in only a portion of the 1,000+ micro cap stocks.

Based on the above, it's clear that index ETFs (and index mutual funds) are unlikely to hold a significant amount of micro cap stocks. That probably explains also some of the apparent lack of interest in them.


All data is a live query from our database. The wording was last updated: 07/09/2020.

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