A Comeback for America’s Smallest Stocks

Despite grim economic news, share prices of small U.S. companies are rising rapidly and fueling a debate among investors about how much longer it can keep up. This according to a recent article in The Wall Street Journal. The article reports that, even though the U.S. economy “shed a record 20.5 million jobs in April” and analysts are warning that the pain related to the coronavirus pandemic will last longer, investors are channeling money back… Read More

Small Caps’ Collapse and What’s Behind It

A recent article in CityWire examines why the small-cap Russell 2000 index has underperformed its large-cap counterpart over the long-term, contrary to the widely accepted view introduced by Nobel laureates Fama and French back in 1992. “Much has been written lately about growth versus value and what may, or may not, have changed,” the article says, outlining what it describes as the “small-large dichotomy.” Here are some key takeaways: One key reason for the performance… Read More

Stock Market Rout ‘Eviscerated’ Small-Caps

Small-cap stocks have taken a particularly strong beating over the past month, according to a recent article in The Wall Street Journal. “Companies in the small-cap category, which typically have a market value of about $2 billion or less, tend to be more sensitive to economic downturns than their larger peers,” the article explains, adding, “the growing fears of economic disruption caused by the coronavirus pandemic hit when small-caps already showed potential vulnerabilities.” The resulting… Read More

“Golden Cross” Price Pattern Forming Small Caps

A MarketWatch article from earlier this month discussed the possibility of a “golden cross” price pattern to emerge in the Russell 2000 index, the benchmark of small cap stocks, which could lead to “more than a small victory for small-caps.” “Many market technicians believe that when the 50-day moving average crosses above the longer-term 200-day moving average, this relatively rare golden cross marks the point where a shorter-term rebound morphs into a longer-term uptrend,” the… Read More

Small Caps Stall Amid Weaker Economic Data

Small cap stocks, which surged after President Trump’s election and through last summer, have stalled a economic data has weakened and investors have begun bracing for a possible recession. This according to a recent article in The Wall Street Journal. The asset class is generally considered “riskier in periods of stress and more prone to a pullback because of their inconsistent earnings, higher debt levels and lack of diversification in their business activities,” the article… Read More

Michael Burry of The Big Short Sees Passive Investing Bubble

Michael Burry, whose bet against mortgage securities before the 2008 crisis was immortalized in the film “The Big Short” sees another contrarian opportunity in what he characterizes as a “bubble” in passive investment. This according to an article in Bloomberg. The article says, “As money pours into exchange-traded funds and other index-tracking products that skew toward big companies, Burry says smaller value stocks are being unduly neglected around the world.” In a note to Bloomberg… Read More

Small-Cap Troubles Signal Economic Worry

Small company stocks have been hit hard this year, and “investors are beginning to wonder if that is a taste of what is to come with the wider market.” This according to a recent article in The Wall Street Journal. The divergence in performance between small- and large-cap stocks is raising flags for some, the article reports, adding that small-caps—which derive more revenue from domestic businesses—”typically rise ahead of a wider market rally and fall… Read More

The Size Factor: A Case Against Small Caps

Although investors expect to be compensated for the higher inherent risk associated with small cap stocks, historical returns haven’t supported this thesis, according to an article in CFA Institute that analyzes whether different size metrics might have generated better performance. “Market capitalization is the prevailing metric for weighting stocks in equity indices. But it’s not the only way to measure the size of companies,” the article argues, outlining four alternative metrics that CFA Institute applied… Read More

Rules for Small-Cap Investing

An article in Bloomberg last month profiles Samantha Lau, co-chief investment officer of small and SMID growth strategies at AllianceBernstein. Lau subscribes to some basic rules of small-cap investing, including: “Never sell half of your position. If you think something is wrong, exit and revisit.” “It’s never too late to sell a loser.” “A good company is not always s a good stock.” The article explains that Lau, along with four co-managers, adhere to a… Read More

Small and Passive is Better in Money Management

A recent S&P report offers deep-dive analysis into mutual fund performance over the past year versus various benchmarks, according to a Bloomberg article by columnist Barry Ritholtz. “Growth stocks are trouncing value,” Ritholtz writes. “Small caps are beating large. And more professional managers are beating their benchmarks now than a year earlier.” Here are some highlights of the findings: For investors in U.S. equity markets, small-cap stocks showed the strongest performance, gaining 20.5 percent, followed by… Read More