Is Now a Turning Point for Small Caps?

Polen Capital

Research

4 Pages

Polen Capital examines whether small cap stocks are set up for a new period of leadership in the coming years. The piece looks at valuations, earnings growth prospects and the macro backdrop, including interest rates and credit conditions, to frame how small caps compare with large caps. It also highlights where active managers can find high quality small cap businesses that may be overlooked by broad benchmarks.

Date published: October 16, 2025

Key Takeaways

Small caps defined: Focuses on smaller publicly traded companies that tend to be more domestically oriented and earlier in their growth journeys.
Turning point conditions: Describes how lower valuations, improving earnings trends and better financing terms can support renewed small cap leadership.
Role for active: Suggests fundamental research can separate durable small cap compounders from lower quality businesses that remain cheap for good reasons.
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