Displaying items by tag: russell

(Chicago)

Small cap stocks are starting to have their day in the sun. The Russell 200 has started to catch up to large cap indexes this autumn, and some stocks look ready to surge. The index is now up 21.2% for the year, just a few points behind the S&P 500’s 25.5%. According to Merrill Lynch, economic recoveries “tend to be the best phase for small-caps …That’s one key reason we think we could be poised for a shift from large to small”. According to a Jefferies analyst, “I think small is primed to outperform as the economy and earnings improve in 2020 … That’s going to be the whole ballgame”.

FINSUM: It is hard to imagine the US is going to enter an “economic recovery phase” at the end of a ten-year bull run, but the market’s perception of the current economy is exactly that, so these forecasts might be spot on.

(New York)

Small caps socks are having a rough year relative to the S&P 500. The Russell 2000 is up 15%, but behind the 19% gain of large caps. However, one area of small caps is doing great—momentum small caps, which are ahead of even their large cap cousins. Funds like the Invesco DWA SmallCap Momentum (DWAS), are up 26% this year through Wednesday. The fund aims to match the performance of the best 10% of stocks in the Russell 2000. Speaking broadly on the performance, the head of research at Nasdaq Dorset Wright says “Momentum can thrive in a market where you have a wide range of dispersions, and that’s especially true in the small-cap space, where you can have a big difference between the best and worst performers”.

FINSUM: There is a quite a variance in performance and financial conditions of small cap companies, and given the prevailing environment, that is creating highly differential results, which is great for momentum funds.

(New York)

On the one hand the market looks very healthy (new all-time highs every day), but if you look more deeply there are some signs of dysfunction that appear as though they may spill out into the biggest indexes. Demand for risk assets looks quite weak. Consider for instance that the Russell 2000 is hurting even as large caps rise. Similarly, junk bonds are not doing well despite the seeming risk-on environment. Both of those developments show that liquidity is lacking. “Small caps are more sensitive to liquidity issues, both good and bad”, says a market strategist.

FINSUM: The weakness is small caps and junk bonds shows that more investors are sitting on the sidelines right now, but that does not necessarily mean trouble more broadly.

(New York)

Picking small caps is an art, a point that any serious investor in the space knows. Well, one of the best in the business is giving out tips today and advisors would be wise to listen. Samantha Lau, co-CIO of AllianceBernstein’s AB Small Cap Growth Portfolio is giving out her “rules” for small cap investing. Her fund has an admirable record, rising an average of 20% per year for the last decade, better than 95% of her peers. Some of her rules: “If you think something is wrong, exit and revisit”, “CFOs don’t quit to spend more time with family”, they leave because they see better performance elsewhere or something bad is coming. She continued “A good company is not always a good stock”. Her team uses a rigorous methodology that mixes quantitative and qualitative factors.

FINSUM: These are great tips for any investor, but we are particularly fascinated by the comment about great companies not being great stocks. It is an interesting and underappreciated point.

(New York)

As part of our ongoing coverage of the best funds we found and met with at the recent Inside ETFs conference, we want to today suggest our readers take a look at TTAC, TrimTabs Asset Management’s US-focused quality ETF. The fund is predicated on providing investors with the highest quality stocks. In order to do so, TrimTabs focuses on free cash flow, strong balance sheets, and reducing share count. Free cash flow is a particularly important component as it is one of the hardest for companies to doctor, meaning it is a reliable indicator of quality. In order to implement this strategy, the fund uses a quantitative rules-based approach with human overlays that allow for flexibility in terms of sectors, industries, and market caps. TTAC seeks to outperform the Russell 3000 by holding the 100 companies in the index which best embody its investment criteria. The fund has about $125m in AUM and has an expense ratio of 0.59%.

FINSUM: We were very impressed by the folks at TrimTabs. Not only does the CIO, Theodore (Ted) Theodore have the best name in the business, but their enduring passion for their strategy was compelling. We feel this fund has a smart approach and is very competently managed. Definitely worth a look.