In a Trade War, Investors Hide in Small-Caps

Small-cap stocks, which tend be “insulated from overseas turmoil” have been performing well against the backdrop of a looming trade war with China. This according to a recent article in The Wall Street Journal. Since the beginning of the year, the article reports, the S&P Small Cap 600 is up 12.4% (versus 3.5% for the S&P 500) and the Russell 2000 has gained 11.2%. “A rising dollar and concerns about weaker global growth are also… Read More

Insights on Exploiting the Inefficiencies in Small-Cap Stocks

A recent article in Advisor Perspectives outlines an interview with Judd Peters, a portfolio manager of the Hotchkis & Wiley Small Cap Diversified Value Fund. Here are some highlights: Investment process: Peters explains that his team uses a two-step process to find “opportunities in companies that are temporarily under-earning relative to their long-term potential, either due to industry cyclicality or company-specific situations.” According to Peters, “investors often overreact both positively and negatively to short-term financial… Read More

Small-Cap ETFs Showing Big Returns

Small-caps are poised to get a “significant boost this year,” according to a recent article in Barron’s. “While much of the broad market has been stuck in the mud,” the article reports, “the Russell 2000 has returned 6% this year, more than double the S&P 500’s 2.4%. The dollar’s strength, the easing of regulation in the corporate sector, and tax cuts have helped.” The article also points out that, although small-cap operating margins had not… Read More

The Small-Cap Rally Mystery

Small caps have had a good year so far, but the reasons investors favor this asset class may not explain its outperformance, according to a recent article in The Wall Street Journal. This year’s gains, the article says, are due to the fact that small caps are more domestically-focused and are therefore enjoying more of a benefit from the corporate tax cut than their larger peers. They are also poised to benefit from the recent… Read More

Biggest Small Cap Outflow in a Decade

Small-caps have seen the biggest outflow in 10 years, according to a recent Bloomberg article. The article says that after being “spooked by the steepest selloff in the domestically focused stocks” since the election, last week investors pulled $3.5 billion from the biggest ETF that tracks the Russell 2000 Index. It adds, “The biggest outflow in 10 years comes less than a month after small caps roared to an all-time high on speculation Trump administration… Read More

A Contrarian View May Be in Order

The seven-year-old bull market that started in the aftermath of the financial crisis could be facing a shift over the next five years, says Validea CEO John Reese in last week’s Globe and Mail. Reese suggests that such a shift could include a resurgence of emerging markets and trends favoring cyclical, value and small cap stocks over defensive, growth and large cap names. “Investors appear to be betting that economic growth has the potential to… Read More

Investing Principles Part V: Buying Small Cap Stocks

In our final installment of discussion of the Tweedy Browne publication What Has Worked In Investing, we’ll take a look at the relative performance of small-cap versus large cap stocks. We addressed this subject in a recent article for Forbes that discussed the potential relative performance of small and large cap stocks in general terms as well as within the context of impending rate hikes. While, in recent years, we point out that small caps… Read More

Want Private Equity Like Returns? Try a Levered Small Cap Stock Approach.

One young hedge-fund manager says that an investor can enjoy the same hefty returns touted by private-equity firms (through the purchase, turnaround and resale of troubled companies) through buying highly leveraged small-caps stocks. That manager, Dan Rasmussen, is profiled in a recent article by Forbes’ Daniel Fisher. Rasmussen makes the bold argument, Fisher writes, that private equity “isn’t that complicated.” With a history and literature degree from Harvard, Rasmussen was one of the first undergraduates… Read More

Looking for Value in Un-Love Small Cap Stocks

Small-cap fund performance has taken a lot of heat lately, and the “small-cap premium” has been called into question. In a recent article for Nasdaq, John Reese, CEO of Validea, explains how the historic outperformance of small-caps compared to large-caps has reversed in recent years. This has raised a lot of questions in the investment community and has led to a study by a team at U.S. hedge fund AQR, the findings of which resurrected… Read More

Making the Most of Market Anomalies

David Larrabee, Director of Member and Corporate Products at CFA Institute, gave investors an insider’s thought from the 69th CFA Institute Annual Conference in his latest article. Empirical data suggests that there are a number of opportunities for disciplined investors to take advantage of market anomalies in a “meaningful and profitable manner”. Larrabee reminds investors of the macroeconomic picture by discussing chief strategist at BCA Research Peter Berlin’s key advice of what to do in… Read More