Mid-capitalization stocks could stand to benefit the most from the Republicans’ pending tax reform legislation, said entrepreneur and Softkey co-founder Kevin O’Leary.
“The most interesting place to be right now, if you believe we’re going to get a 20 to 22 percent corporate tax rate, is in companies that pay that kind of tax,” O’Leary said Wednesday on CNBC’s “Power Lunch.”
“They tend to be found in the Russell 2000. They’re domestic companies with 100 percent of their revenue in the U.S.,” he said.
The Russell 2000 tracks stocks with smaller market caps — the average company’s total value is about $2.27 billion, and the index’s largest company boasts a capitalization of $6.55 billion, according to the FTSE.
While the sheer number of small companies that “don’t make any money” in the Russell might make the index less than enticing, O’Leary said it’s well worth searching for the biggest fish in a lake filled with minnows.
“You have to do a lot of work to find the ones that are actually candidates. They have to be profitable — generally they’re larger cap, around a $4 billion market cap — but they are going to have an extraordinary upside,” he said.
Source : cnbc.com
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