Don't sleep on small cap stocks.

Many of the mega-cap names that often dominate headlines have seen shares suffer into year end, burning shareholders that bought in late to companies like Facebook (FB) and Amazon (AMZN) . Further, a rebound for these companies takes a great deal of momentum, given their hulking market caps.

So, for longer term investors, it may be time to shake up their share-holdings and add in some small and mid-cap names that have historically outperformed larger cap names.

"These are smaller companies that have a lot of room to grow, not something that's long in the tooth," George Young, portfolio manager of the $295.3 million Villere Balanced Fund (VILLX) told TheStreet. "What you want to buy is a company that is not well known in the hopes they can become well known."

Specifically, Young recommended names like WW International (WTW) based on its strong international and online growth as well as its attractive valuation, 2U Inc. (TWOU) to attack the still nascent growth of online learnings, and Steris (STE) based on the company's pre-eminence in hospital sanitation.

That said, investors should be willing to encounter some volatility in the near term.

"Small caps in particular are going to be more volatile," Young explained. "You have to be prepared for that. It's not for the faint of heart."

For the patient investor the risk could be worth some short-term turmoil.

"It's worthwhile to take the risk because you expect a [greater] payoff," Young said.

The payoff for Young's fund has certainly been handsome in the long term, yielding a 340% return since 1999, beating the S&P by over 100 basis points over that period.

More articles from Real Money's Kevin Curran here:

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