Hulbert: Small Cap Sector Shockingly Overvalued

In a recent MarketWatch article, Mark Hulbert reveals a revised calculation that the small-cap sector is currently valued at a whopping 78.7 times earnings. He writes, “the Russell 2000’s true P/E today is higher than it was at either the top of the internet bubble or the 2007 bull market peak.” Hulbert describes the calculation, which he credits to financial services firm INTL FCStone’s Vincent Deluard, who told him that nearly a third of the… Read More

Small Companies on the Decline, says Zweig

The number of publicly-traded companies has declined by half over the past two decades, with most of the decrease attributed to the smallest companies, writes Jason Zweig in last week’s Wall Street Journal. Zweig questions, however, whether this is making it more difficult for “stock pickers to beat the market and for investors to forecast future returns from past data,” an assertion the columnist made in an earlier article. Zweig cites comments from AQR partner… Read More

Small Cap Stocks Losing Earnings Steam

The global growth outlook, more than a smoothing of the Trump bump, has resulted in small-cap stocks losing the upper hand—a dramatic shift from what happened right after the election. This according to The Wall Street Journal’s Steven Russolillo. Small-cap stocks (those with market capitalizations generally under $2 billion) spiked by more than 11% between the election and last Thanksgiving, writes Russolillo, who explains that many traders bet on the new president’s tax cuts and… Read More

7 Promising Small-Cap Growth Stocks for 2017

Celebrated investor James O’Shaughnessy wrote What Works on Wall Street (1996) after conducting exhaustive research concerning the performance of a host of investment strategies. This work led to the development of his Cornerstone Growth Strategy, outlined by Validea CEO John Reese in this week’s TheStreet. Using the screening model Reese fashioned after the O’Shaughnessy strategy, he identified the following 7 small-cap picks: Of the seven, he highlighted the following stocks that scored well under other… Read More

The Trump Victory and the Small-Cap Reversal

While over the past ten years large-cap stocks have outperformed small-caps, the recent election upset caused a rally in the latter and added complexity to the relationship between the two. In a recent Forbes article, Validea CEO John Reese addresses implications related to this shift and offers the following small-cap picks: Sanderson Farms (SAFM) is a producer, processor, marketer and distributor of fresh and frozen chicken (market cap $1.94 billion) that earns high marks for… Read More

Small-Caps on the Upswing

As all eyes continue to be on the president-elect, questions abound regarding if and how he will implement the changes he championed on the campaign trail. In the meantime, however, an article in this week’s Barron’s argues that his election has proved a shot in the arm for small-cap stocks. That article asserts that, since election day, the small-cap Russell 2000 index has risen 10% compared with the S&P 500’s 2% gain and “the advance of the… Read More

How Could Rising Rates Affect Small-Cap Stocks?

As we continue to wait for the Fed to move on rates, questions loom as to how a rising rate environment will affect the markets. In a recent article for Proactive Advisor magazine, Validea CEO John Reese shared his thoughts on how this could specifically impact small-cap stocks. Conventional wisdom, he explains, says that rising rates can negatively affect small-cap performance (companies with market capitalizations of between $250 million and $2 billion) since: It leads… Read More

Investing Principles: What Has Worked

For the next several weeks, our daily blogs will include information from a 1992 publication by the investment firm Tweedy, Browne Company LLC entitled What Has Worked in Investing: Studies of Investment Approaches and Characteristics Associated with Exceptional Returns. The booklet includes data from over fifty studies of share performance woven together with insights based on the firm’s five plus decades of industry experience as to which stock characteristics have provided the best returns over… Read More

Big Opportunity In Small Stocks?

It’s no secret that the market doesn’t look too cheap right now. In fact, by many measures, it’s overpriced. But the difference in the valuation of small stocks and large stocks right now is striking, Validea CEO John P. Reese writes in his latest column for Forbes.com. “Since the end of 2005, my company has been tracking the valuation characteristics of the several thousand stocks in our database, a pretty good approximation of the U.S.… Read More

Investing in Small Caps – Beware of Style Drift & Avoid Junk

If you are investing in small cap stocks, it is important not to make these two big mistakes writes Mark Hulbert for Barrron’s, because after few years of lackluster relative returns small caps look poised to turn the corner. As Hulbert points, smaller cap stocks have outperformed large caps over the long term but “for the past five years the Russell 1000 (which contains the 1,000 largest U.S. stocks) has beaten the Russell 2000 (the… Read More