A Small-Stock Revival Is Here at Last
Posted: April 21, 2026
April 20, 2026 (Maple Hill Syndicate) – Well, finally!
Small-cap stocks have risen more than 12% this year through April 17, while large-caps have advanced 4.5%. This small-stock revival has been a long time coming.
Over the past five years, large-company stocks have averaged a 12.8% return per year (including dividends), while small-cap stocks have averaged 5.6%. As a fan of small stocks, I’ve been impatient for a revival.
Cap is short for capitalization, the current market value of a company’s stock. There’s no widely accepted taxonomy for stock size.
I define large-capitalization stocks as those with a market value of $10 billion or more. Mid-caps have a market value of $1 billion to $10 billion, small-caps $250 million to $1 billion, and micro-caps less than $250 million.
By that definition, there are about 1,150 small-cap stocks among U.S. companies. Here are five of them that look promising to me now.
Bank7
Bank7 Corp. (BSVN), based in Oklahoma City, Oklahoma, serves customers in Texas and Kansas as well as its home state. Its lending program stresses commercial loans in the real estate, energy and agricultural industries.
I like to see banks earn 1.0% on assets or better. Bank7 has done that in each of the past ten years, and often much better.
Risk factors include a high percentage of commercial real estate loans, and a relatively high cost of funds.
I recommended Bank7 in my last column on small-cap stocks, a year ago. It is up nearly 29% since then, but still sells for only nine times the past four quarters’ earnings.
Vital Farms
“Conscious Capitalism” is the motto at Vital Farms Inc (VITL). Based in Austin, Texas, the company sells eggs and butter from animals that were raised in pastures, not pens or cages.
Over the past five years, Vital Farms has increased its sales at a 23%-a-year clip. Yet the stock sells for only nine times earnings and 0.74 times revenue, cheap multiples.
Shares have plunged 58% this year as the company projected a slowdown in growth. Multiple shareholder lawsuits have been filed. Yet most analysts still maintain a favorable rating on the stock.
Taylor Devices
Taylor Devices Inc. (TAYD) makes shock-absorption systems, not for cars but for military aircraft and buildings. The founder, Paul Taylor, was a pilot and aircraft designer. He started Taylor Devices in 1955, emphasizing liquid springs, which were more effective than mechanical coil springs.
The company, based in North Tonawanda, New York, got into earthquake protection systems in the 1980s. It has notched a profit 21 years in a row, and 29 out of the past 30. Taylor Devices is debt free, and the stock seems reasonably priced to me at about 18 times earnings.
Orange County
Orange County Bancorp (OBT) doesn’t serve the well-known luxury area of Orange County, California. It serves the more middle-income area of Orange County, New York.
This little bank posted a 1.6% return on assets last year (you’ll recall I consider 1.0% or better to be attractive) and an 18% return on stockholders’ equity. Wall Street hasn’t discovered it yet. Only two analysts follow it, both of whom rate it a “buy” or “outperform.”
EACO
From Anaheim, California, comes EACO Corp. (EACO), which is mainly a distributor of electronic components and fasteners. It has three divisions: Bisco Industries, Fast-Cor and National-Precision. Few investors have heard of any of them, or the parent company either.
Nonetheless, the stock has risen more than double in the past year and has more than quintupled in the past five years. It’s still not very expensive, selling at about 12 times earnings. Return on equity has been running lately at 24%, a handsome showing.
Performance
Since the beginning of 2000, I’ve written 28 columns recommending a group of small-cap stocks. The average one-year return on these recommendations has been 13.8%.
That beats both the Standard & Poor’s 500 Total Return Index (a large-cap index) at 9.2% and the Russell 2000 Total Return Index (a small-cap gauge) at 11.3%. My small-cap picks have beaten the S&P 16 times, and the Russell 2000 15 times.
Bear in mind that my column results are hypothetical and shouldn’t be confused with results I obtain for clients. Also, past performance doesn’t predict the future.
My picks from a year ago didn’t set the world on fire. Bank7 was my best choice, returning 28.8%. Apogee Enterprises Inc. was worst, down 16.6%. Overall, my picks returned only 7.0%, versus 29.9% for the S&P and 52.9% for the Russell.
Disclosure: I own Taylor Devices and Orange County Bancorp in a hedge fund I run.
John Dorfman is chairman of Dorfman Value Investments LLC in Boston, Massachusetts. His firm or clients may own or trade securities mentioned in this column. He can be reached at jdorfman@dorfmanvalue.com.