While small-cap stocks are usually more volatile than their mid-cap and large-cap brethren, the solid growth opportunities they often deliver make them attractive to many investors. And given the continuing low-interest-rate environment, which is beneficial for small-cap stocks, we think it could be wise to bet on fundamentally sound small-cap stocks CTS Corporation (NYSE:CTS), Universal Electronics (NASDAQ:UEIC), and Travelzoo (TZOO), which have suffered price declines over the past few months. Let’s discuss.Last week was the best week in months for the major stock indexes, thanks to a stronger-than-expected start to the third-quarter earnings season. However, the stock market is expected to remain volatile on concerns over rising Treasury yields, inflation, and disappointing Chinese economic data. While small-cap stocks typically experience more volatility than mid-cap and large-cap stocks when the market is volatile, the current low-interest-rate environment is beneficial for small-cap stocks.
Small-cap stocks usually offer higher growth potential. Over the long run, small-cap value index funds outperform the S&P 500. Investors’ interest in small-cap stocks is evidenced by the Dow Jones U.S. small-cap total stock market index’s 39% returns over the past year.
Therefore, given the current market volatility, we think it could be wise to scoop up the shares of beaten-down small-cap stocks CTS Corporation (CTS), Universal Electronics Inc. (UEIC), and Travelzoo (TZOO), which are fundamentally sound.