Hulbert: Large Caps Now and Small Caps in January

Small-cap stocks outperform large caps, on average, over the long term, but almost all the small-cap advantage occurs in the early part of the year. This according to a recent MarketWatch article by Mark Hulbert. “As you can see from the chart below,” he writes, “their advantage gradually diminishes as the year progresses, and is actually negative by the last quarter of the year.” The widely-accepted theory on the relative performance of these two asset… Read More

Small-Caps are on the Upswing

After a brief post-election surge at the end of 2016, small-caps “went nowhere” for nine months, but the asset class has “finally decided to join the party,” writes Ben Carlson of Ritholtz Wealth Management in a recent Bloomberg article. “Although 2013 was a breakout year for small-cap stocks,” writes Carlson, “there have been a steady number of all-time highs in the ensuing years.” Since small-caps can be volatile, this could be a sign that investors… Read More

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