NEW YORK (TheStreet) -- Most investors tend to overlook companies with tiny market caps, simply because there is less news on them. News flow tends to revolve around the mega-cap stocks of the world, like Microsoft (MSFT) - Get Report, Apple (AAPL) - Get Report and Exxon Mobil (XOM) - Get Report.
But below the small- and mid-cap sector is a "vastly undiscovered space in the public equity markets," micro-cap stocks, said Machel Allen, CIO of Metis Global Partners.
These companies tend to have a market of $50 million to $500 million, she added. In the U.S., these companies are generally new and are akin to public startup companies. But global micro-cap stocks have impressive cash flows, dividend yields and are more mature than most may think. The average global micro cap company has been established for 31 years, Allen said.
Part of the reason U.S. investors should consider owning micro-cap stocks is simply because they are under-followed. This leads to great opportunities that many investors simply miss, she explained.
Micro-cap stocks also have an incredible low correlation to other stocks, creating attractive diversification within one's portfolio. For example, with 1 being equal to a 100% correlation, micro cap stocks have a correlation of 0.7 to small cap stocks and just 0.3 to the S&P 500.
There has been increasingly more liquidity in these markets as well, which helps to curb volatility in the space, she reasoned.
As for currency woes of foreign micro-cap stocks, Allen says she doesn't worry about hedging their currency exposure. In the short term, it may be beneficial, she acknowledged, but since she's a long-term value investor, research has shown that currency hedging over long periods of time tend to negatively impact the investment's performance.
There's plenty of opportunity in the group, with roughly 13,000 securities falling within the micro-cap category, she concluded.
This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.