The term "microcaps" applies to companies with low or "micro" capitalizations, meaning the total value of the company's stock. Microcap companies typically have limited assets. For example, in cases where the SEC suspended trading in microcap stocks, the average company had only $6 million in net tangible assets — and nearly half had less than $1.25 million. Microcaps tend to be low priced and trade in low volumes.

When it comes to investing, few asset classes evoke more enthusiasm and consideration than microcaps. While the historically strong performance of microcap stocks make them very attractive, the returns may seem too good to be true, causing some investors to be concerned about the viability of microcaps and others to conclude they have already missed the upside. Not necessarily so.

Opportunities for sound and rewarding investments in this asset class abound. The key to benefiting from them lies in removing emotion from the decision-making process, and maintaining a strict bottom-up, bottom-line discipline.