Forbes’ Kenneth Fisher says not to fall in love with small-cap growth stocks at this stage of the bull market.
In his latest column, Fisher says small-cap cyclicals “get all the attention early in every economic expansion because year-over-year earnings comparisons look great coming off a depressed base.” But, he adds, “as the expansions run, fewer firms are able to show improved earnings. The only ones that do are mature companies with years of experience managing real unit-volume growth. They are the standouts in an earnings growth deceleration phase.”
Fisher says that the second half of almost every bull run has been led by mega-cap stocks. The reason: “Skeptics who were originally resistant to owning stocks finally get up the courage to dip their toes in. They naturally find it easiest to buy what they know — giant, safe blue chips — stocks whose products are household names.”
Currently, Fisher says, only about 70 stocks have market caps above $80 billion, and he says investors should pick good stocks from among that group. Among a couple stocks he likes: drug giant Pfizer.