(New York)

Investors really focused on small caps may have noticed, but others wouldn’t have. There is an odd quirk occurring in the Russell 2000 this year. A third of the index doesn’t have any profits, yet those companies are rallying 50% faster than the rest of the index. Money losing small cap stocks are up 14.5% this year versus 9.2% in profitable ones. The big question is why. Bloomberg offers no clear answers, but does say that ultra low rates have historically boosted the proportion of money losing companies.

FINSUM: Passive investing is surely helping, as all these money losing firms are still seeing their shares bought purely because of index replication. A Russell 2000 minus money losers ETF would be interesting.