In his latest column for Canada’s Globe & Mail, Validea CEO John Reese takes a look at an area of the market that has historically produced strong outperformance: small-cap value stocks.

“From 1927 through 2009, U.S. large-cap growth stocks have averaged a 9.08-per-cent annual compound return, according to the data of Dartmouth College professor and noted stock researcher Kenneth French,” Reese writes. “Small-cap growth stocks, meanwhile, have averaged 9.23 per cent, and large-cap value plays have fared even better, averaging 11.21 per cent. But well ahead of the pack are small-cap value picks, which have averaged a 14.17-per-cent return per year.”

There are a number of apparent reasons for this trend, Reese says, including the fact that small-caps generally fly under the radar of analysts and investors and are thus more subject to mispricings than their larger peers. Some of the gurus upon whom he bases his Guru Strategies — including the great Warren Buffett — have extolled the virtues of smaller stocks over the years, Reese notes.

To read the full article, which includes a few small-cap value picks that get approval from Reese’s guru-inspired models, click here.