Displaying items by tag: russell 2000

(New York)

Here is potentially good news for investors—the market’s start to this year has been the best since 1987. Both the S&P and Russell have risen considerably in the first 12 sessions of the year, with the former jumping 8.8%. The best start since ’87 sounds good, except that 1987 rivals 2008 as having the worst reputation with investors (shares fell almost 23% in a single day in October 1987). Analysts are urging caution, especially on small caps, as the gains don’t seem sustainable given the huge buildup in leverage that has occurred in small companies over the last few years.

FINSUM: The parallel to 1987 is completely irrelevant, as it is really only based on the percentage gain over 12 sessions.

(New York)

Investors looking for signs of trouble have no shortage to examine. However, one that might have escaped notice is that small caps are on the brink of a full blown bear market. The Russell 2000 has fallen a whopping 17% since its all-time high close on August 31st. The S&P 500, for comparison, is off 10%.

FINSUM: This is really interesting because it doesn’t make much sense. Both the trade war and the economic situation are more favorable to small caps than their larger peers, yet they are falling more sharply.

(New York)

One of the big beneficiaries of all the geopolitical events of this year, as well as of rates hikes, has been small caps. Smaller companies tend to perform better in economic expansion, and they look more likely to hold up to foreign trade tensions as they have a more domestic focus. After hitting records in August, small caps are now in correction territory, having lost 10% from their high. They are now underperforming large caps for the first time this year as many see trade tensions easing.

FINSUM: Small caps sometimes suffer at the end of economic expansions, so this move makes sense. Still an almost 9% loss in the Russell 2000 this month is rough.

(Chicago)

Small cap stocks have been taking it on the chin. They have been getting hammered this week, and their performance (Russell 2000) has lagged the S&P 500 by almost 3% the last few days. That is a rare occurrence, which means there may be a buying opportunity. After such a bout of bad performance, the Russell 2000 has historically outperformed the S&P 500 by a percentage point over the next 20 days.

FINSUM: This could be a good short-term buying opportunity, but as ever, we struggle with these kinds of trade ideas because they seem to be based purely on historical precedent and lack any catalyst.

(Chicago)

Small caps have been having a great run this year. Ever since Trump was elected with his America-first mantra, small caps have done well, but the trade war has pushed them ahead of their large cap peers his year. So how to find the undervalued small caps with a bright future, ones that are valuable but currently misunderstood? A team at William Blair tries to do just that. Their picks are: Ligand Pharmaceuticals, Codexis (oil industry), Varonis Systems (security software), and Boot Barn Holdings (western clothing retailer).

FINSUM: All of these names have a unique story and catalyst which should help them become much more valuable.