Displaying items by tag: outperformance

Friday, 14 May 2021 17:50

Why Midcaps May Be Poised to Outperform

The conventional wisdom in markets has always been that large caps hold up better in periods of volatility, and small caps outpace in returns when markets start to recover. The reality, however, is far different. If you take a look at a series of turbulent periods of the last few decades, you can see a clear trend: midcaps actually perform better. They suffer similar losses during periods of volatility, but actually recover faster than both “domestically-focused” small caps and “mature” large caps. In periods of high volatility, midcaps have fallen by 41% on average, slightly less than large caps at 42.93% and small caps at 45.05%. In periods of recovery, it has taken midcaps only 304 days to recover versus 544 for large caps, and 432 for small caps.

The data highlights the significant outperformance of midcaps versus their peers. So how can investors best commit capital to midcaps? Take a look at State Street’s SPDR S&P MIDCAP 400 ETF.

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n.b. This is sponsored content and not FINSUM editorial.

 

Source: https://www.ssga.com/library-content/pdfs/etf/us/mid-caps-defy-conventional-wisdom.pdf

Published in Eq: Value
Thursday, 15 November 2018 14:12

Why Small Caps’ Outperformance is Over

(New York)

One of the guiding mantras of small cap investing has always been that small caps tend to outperform their larger peers over the long-term. While always cyclical, small caps have outperformed large caps over the last several decades. However, in recent years that has all changed. In fact, since 2005, the relative performance between the two share classes has been trendless, with no discernible relationship. This is directly counter to the almost century-long trend that preceded it. One CIO explained the change this way, saying “Market-cap tilts have historically been about catching, and riding, strong and persistent performance waves … Over the last 13 years, in an unconventional fashion, the opportunities to add performance from cap tilts have been relatively small and have required frequent and expert timing”.


FINSUM: Interesting change for small caps. We suspect the change has to do with a combination of the pre-Crisis boom and the extraordinary liquidity thereafter.

Published in Eq: Small Caps
Thursday, 17 May 2018 10:35

Strong Earnings Mean the Market Falls

(New York)

If there was ever a counterintuitive sentence about stocks, it is the title to this article. However, that is what has proven to be true in the past. According to research produced by the Wall Street Journal, stock markets tend to perform poorly after great earnings seasons. The study found that over the last seven years, both US and European stocks tend to perform poorly following great earnings. Perhaps even more interestingly, when earnings undershot estimates, stocks tended to perform better than average.


FINSUM: This is a tough one to explain except by taking account of markets’ pre-pricing of earnings. Nonetheless, something of which to be mindful.

Published in Eq: Large Cap
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