27 Dec 2014

Small Cap is Dead. Love Live Small Cap!

Returns for stocks are great everywhere you look in the developed world.  One of the best places though is in small US stocks.  The Russell 2000, the most common small cap benchmark is up 39.3 percent, much higher than the 32.4 percent return for the S&P 500 (through Dec 26). Microcap stocks, as measured by Russell, are up an astounding 45.46 percent this year through yesterday. In this context, it’s… Read More

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17 Oct 2014

Are Micro Caps Signaling a Bottom?

There are many interesting things going on right now and one of them, in my view, is the sharp rally in micro cap stocks in the past four trading sessions. I’ve noted in earlier missives that small cap stocks are having a very tough year so far, especially at the end of the third quarter (just in time for your quarterly reports, I’m afraid). The following chart shows the relative performance… Read More

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2 Oct 2014

Patience is a Virtue

Every investment strategy requires patience. Let’s say, for example, that you believe, as we do, that small cap stocks tend to outperform large cap stocks over time. You’ve got the empirical data going back to 1926 that clearly shows, with statistical significance, that small stocks outperform large ones. Small stocks are more volatile than large stocks, but that fits elegantly with the theory that to earn a higher return, you… Read More

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16 Apr 2014

Are Small Caps Expensive?

The recent underperformance of small cap stocks has me wondering whether the outperformance that small cap stocks has enjoyed over the last decade could be coming to a close. Over the last ten years, the S&P 500 has gained 7.16 percent and the S&P 600 Small Cap Index has earned 9.81 percent a year, an outperformance of 2.65 percent per year.

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