Once again there is a narrative on the street that small caps are overpriced. Is there anything wrong with that narrative? The answer is No. Out of the total universe of smallcap stocks listed on the exchanges, maybe 90 % are overpriced. But a distinction needs to be made between a stock being overpriced and bad business. A situation of an overpriced stock gets corrected as the earnings move up, but a bad business cannot be set right. So, when buying a smallcap, focus on the underlying business and that probably will help in retaining that stock for a long period to take full benefit of the growth of the business.
