Also working in the sector's favor is a proposed cut in the capital gains tax rate, said Claudia Mott, director of small-cap research at Prudential.

Satya D. Pradhuman, head of small-cap research at Merrill Lynch, talked last week about the Lilliputians and their prospects for becoming bigger.

Claudia Mott, director of small-cap research at Prudential Securities, said there were several reasons for the rebound in small-cap stocks.

The report, by Claudia E. Mott, director of small-cap research at Prudential, said investors might be heartened by what happened in the mid-1970's.

"This is just the beginning of a comeback rally," said Claudia E. Mott, director of small-cap research at Prudential Securities.

The key will be whether big companies can maintain their profitability, said Claudia E. Mott, director of small-cap research at Prudential Securities.

"Value is having a phenomenal year," said Claudia E. Mott, director of small-cap research at Prudential Securities.

Claudia E. Mott, director of small-cap research at Prudential Securities, took some time last week to talk about when small might again be beautiful.

Satya Pradhuman, director of small-cap research at Merrill Lynch, said several factors should enable small-cap stocks to continue to hold their own in the market.

The comparison is even better than that, said Satya Pradhuman, director of small-cap research at Merrill Lynch.