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I'm looking for a few good small and midcap value funds to add to my portfolio...I tend to prefer avoiding funds from the big guys and know that the MFO community always has its pulse on the best independent fund offerings, so I'd appreciate any input/ideas. Thanks.
A lot depends on what you're looking for, beyond "small and midcap." Some folks like deep value, some seek low-vol, absolute value or concentrated portfolio. I ran a quick screen through MFO Premium for SC/MC value sorted by highest Sharpe ratio over the full market cycle. Here's the shortlist:
Intrepid Endurance (formerly Intrepid Small Cap, ICMAX) - absolute value which means huge cash holdings until compelling valuations appear. Up 4% YTD despite 67% cash which implies that equity portion was up 12%. Lost 18% in the 2007-09 crash. In a similar vein but without full-cycle performance is Aston/River Road Independent Value (ARIVX) - the former manager of ICMAX is at 85% cash and has still gained 8.5% YTD which implies about a 60% gain in the equity portfolio. Most folks have been pretty caustic about the funds because the managers have been steadily harvesting gains and building cash since about 2011 which means they've missed the current party.
Victory Sycamore Established Value (VETAX) - $4 billion mid-cap fund with a value bias. Nominally has a load though those are often avoidable. Fully invested, consistently top decile performer. Lost 43% in the market crash, substantially less than the index.
Wells Fargo Special Mid Cap Value (WFPAX) - $3.5 billion mid-cap fund with a value bias, same story on the load. Launched in 1998 but the current team has been onboard about seven years, top 5% performer. Down 44% in the crash.
Hennessy Cornerstone Mid Cap 30 (HFMDX) - no-load with about a billion. Substantially more volatile than the two funds above, somewhat higher returns, very low turnover.
Queens Road SCV (QRSVX) - about $135 million, lots of insider ownership, tends toward small blend, top 20% over time. About 20% cash at the moment and up about 5% YTD. Dropped 42% in the crash versus 53% for a comparable index fund.
Intrepid Disciplined Value (ICMCX) - the all-cap value version of Intrepid Endurance. It's about half cash, half stocks now. 4.5% YTD. Lost 37% in the crash. It's a true all-cap value so it's hard to benchmark - most value indexes are mostly large cap and most mid-cap value indexes are mostly midcap. Eyeballing several, I'd say that a comparable passive product might have lost 50-55% compared to this fund's 37%.
One possibility with a bit more risk might be Adirondack Small Cap (ADKSX) which dropped an index-like 52% in the crash but rebounded so sharply that it's now leading its peers by 2.7% annually over the full cycle.
If you're a true believer in the research, you really need to look at Towle Deep Value (TDVFX) which has about the cheapest and smallest-cap portfolio around. Shorter record - just under five years - but very solid returns, vast insider ownership, no marketing, healthy internal culture. Microcap deep value is not, to be clear, a place for the faint of heart.
Many of the top small cap value funds are closed to new investors, and this is an ongoing good news/bad news. Nuveen FSCCX and Wisdom Tree DES are both open and have among the best 3 and 5-year records. Mid cap value is also pretty bare, but Wells Fargo SMCDX has a good track record. ETFs offer more options in PEY, DVY, DON, all of which have out-performed the S&P 400. But, as David says, it depends on what is important to you. Diamond Hill has a great small cap fund, but it is closed.
We use Vanguard Index VIMAX as a core hold, with UMBMX as a concentrated add-on. It has out-performed both midcap blend and value over the last 10 years, mostly it has less downside loss.
For small cap we use SWSSX or VTMSX as a core, with IYSIX in our more aggressive accounts.
Also review ICMTX (currently up 10.40%). This is a new fund from Intrepid. It has small/mid value stocks (domestic and other). The beta of the fund has been quite remarkable. It is approximately 80% invested.
@MFO Members: If I'm not mistaken Fidelity has a manager by the name of Tillinghast that's done fairly well in the mid-cap fund arena. Despite its large size, Fidelity Low-Priced Stock continues to thrive and retains its Morningstar Analyst Rating of Silver. Regards, Ted
If we're including multi-billion funds, one I like is American Century Mid Cap Value, ACMVX. (Before anyone writes that this is closed, look again. It is only closed when purchasing through a third party, e.g. Schwab.)
I ran a search for small funds in the small cap value space, and ran across LSV Small Cap Value (LVAQX). In some senses, similar to TDVFX (tiny AUM, tiny cap). Not quite deep value though. Even lower turnover (15%). And fine performance so far (three years old - see original share class LSVQX).
This seems like a quant fund with training wheels. It keeps its sectors within 5% of its benchmark - I'm guessing that this could explain the low turnover, since quant funds are often whipsawed.
ICMTX is an intriguing option, but I don't know much about Intrepid Capital Funds. For those with experience investing in Intrepid funds, what do you think of the firm? Thanks in advance for any and all replies!
@PopTart: perhaps the best known fund from this firm is ICMAX. The fund was once co-Managed by Eric Cinnamond who has since opened ARIVX. These funds aren't for everyone as they may (and presently do) hold large cash balances. Mark Travis and Jayme Wiggins worked alongside Eric Cinnamond, while he was there. The new offering ICMTX appears to be an allcap offering designed for those who wish to have more control over their allocations. Meaning the cash balance is muted in comparison to their 'normal' funds. The prospectus mentions it may take a more defensive posture, if needed, but the funds typical beta appears to be rather muted. It is true that approximately 20% of the fund is in cash/other, but I've been amazed at the smoothness of the ride (for lack of a better description.
Yes, interesting to see superiority of GABSX and WEMMX since 1998 over VB, and then look at consistency and closeness of tracking wrt to it for 10/5/3/1y (which Snowball disdains for some reason, if I read him right), meaning sometimes outperformance by a hair and sometimes underperformance.
Gabelli appears to add significant alpha much of which goes into his pocket. Weird, or maybe not weird.
@BrianW, Sorry to be obtuse, but what exactly is this showing? I am not understanding.... Go to M* and graph growth of $10k of GABSX or other favorite vs VB for max/10/5/3/1y.
- For benchmarking small cap value funds, a small cap value index would appear most appropriate - If the benchmark is an index, graph the index itself - If the benchmark is a fund, graph the cheapest share class of the fund.
For Vanguard that's the Institutional or (if it exists) the InstitutionalPlus share class. These are cheaper than their fund's ETF share class, and also eliminate market tracking error.
In any case, graph total return as opposed to price.
Here are graphs (at M*) of Vanguard Small Cap Value Index, Institutional Class VSIIX vs. M*'s Small Value Total Return Index (graph), and Vanguard Small Cap Index InstitutionalPlus Class VSCPX vs. both the Russell 2000 total return and the M* US Small Cap Total Return Index (graph)
You can add your fund(s) of choice to these graphs. They don't require Flash (google seems to require Flash, and I've uninstalled it on my machine).
Not surprisingly, the Russell 2000 index significantly underperforms the M* index. The Russell 2K is especially susceptible to front running (because it is widely followed, because it contains small caps that are more sensitive to price movements, because it reconstitutes annually). What is IMHO more interesting is that the fund ever so slightly outperforms even the M* index.
Comments
A lot depends on what you're looking for, beyond "small and midcap." Some folks like deep value, some seek low-vol, absolute value or concentrated portfolio. I ran a quick screen through MFO Premium for SC/MC value sorted by highest Sharpe ratio over the full market cycle. Here's the shortlist:
Intrepid Endurance (formerly Intrepid Small Cap, ICMAX) - absolute value which means huge cash holdings until compelling valuations appear. Up 4% YTD despite 67% cash which implies that equity portion was up 12%. Lost 18% in the 2007-09 crash. In a similar vein but without full-cycle performance is Aston/River Road Independent Value (ARIVX) - the former manager of ICMAX is at 85% cash and has still gained 8.5% YTD which implies about a 60% gain in the equity portfolio. Most folks have been pretty caustic about the funds because the managers have been steadily harvesting gains and building cash since about 2011 which means they've missed the current party.
Victory Sycamore Established Value (VETAX) - $4 billion mid-cap fund with a value bias. Nominally has a load though those are often avoidable. Fully invested, consistently top decile performer. Lost 43% in the market crash, substantially less than the index.
Wells Fargo Special Mid Cap Value (WFPAX) - $3.5 billion mid-cap fund with a value bias, same story on the load. Launched in 1998 but the current team has been onboard about seven years, top 5% performer. Down 44% in the crash.
Hennessy Cornerstone Mid Cap 30 (HFMDX) - no-load with about a billion. Substantially more volatile than the two funds above, somewhat higher returns, very low turnover.
Queens Road SCV (QRSVX) - about $135 million, lots of insider ownership, tends toward small blend, top 20% over time. About 20% cash at the moment and up about 5% YTD. Dropped 42% in the crash versus 53% for a comparable index fund.
Intrepid Disciplined Value (ICMCX) - the all-cap value version of Intrepid Endurance. It's about half cash, half stocks now. 4.5% YTD. Lost 37% in the crash. It's a true all-cap value so it's hard to benchmark - most value indexes are mostly large cap and most mid-cap value indexes are mostly midcap. Eyeballing several, I'd say that a comparable passive product might have lost 50-55% compared to this fund's 37%.
One possibility with a bit more risk might be Adirondack Small Cap (ADKSX) which dropped an index-like 52% in the crash but rebounded so sharply that it's now leading its peers by 2.7% annually over the full cycle.
If you're a true believer in the research, you really need to look at Towle Deep Value (TDVFX) which has about the cheapest and smallest-cap portfolio around. Shorter record - just under five years - but very solid returns, vast insider ownership, no marketing, healthy internal culture. Microcap deep value is not, to be clear, a place for the faint of heart.
Just some teasers,
David
Regards,
Ted
Small Cap Value:
http://money.usnews.com/funds/mutual-funds/rankings/small-value
Mid-Cap Value Funds:
http://money.usnews.com/funds/mutual-funds/rankings/mid-cap-value
And of course FLPSX for midcap.
We use Vanguard Index VIMAX as a core hold, with UMBMX as a concentrated add-on. It has out-performed both midcap blend and value over the last 10 years, mostly it has less downside loss.
For small cap we use SWSSX or VTMSX as a core, with IYSIX in our more aggressive accounts.
Regards,
Ted
I ran a search for small funds in the small cap value space, and ran across LSV Small Cap Value (LVAQX). In some senses, similar to TDVFX (tiny AUM, tiny cap). Not quite deep value though. Even lower turnover (15%). And fine performance so far (three years old - see original share class LSVQX).
This seems like a quant fund with training wheels. It keeps its sectors within 5% of its benchmark - I'm guessing that this could explain the low turnover, since quant funds are often whipsawed.
ICMTX is an intriguing option, but I don't know much about Intrepid Capital Funds. For those with experience investing in Intrepid funds, what do you think of the firm? Thanks in advance for any and all replies!
https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1462412944092&chddm=988057&chls=IntervalBasedLine&cmpto=MUTF:HFMDX;MUTF:QRSVX;MUTF:ICMCX;MUTF:ADKSX&cmptdms=0;0;0;0&q=NYSEARCA:VB&ntsp=0&ei=aaMqV4jtPNbKmAG3g7T4Cw
Gabelli appears to add significant alpha much of which goes into his pocket. Weird, or maybe not weird.
Whatever happened to PENNX?
Sorry to be obtuse, but what exactly is this showing? I am not understanding....
Go to M* and graph growth of $10k of GABSX or other favorite vs VB for max/10/5/3/1y.
- For benchmarking small cap value funds, a small cap value index would appear most appropriate
- If the benchmark is an index, graph the index itself
- If the benchmark is a fund, graph the cheapest share class of the fund.
For Vanguard that's the Institutional or (if it exists) the InstitutionalPlus share class. These are cheaper than their fund's ETF share class, and also eliminate market tracking error.
In any case, graph total return as opposed to price.
Here are graphs (at M*) of Vanguard Small Cap Value Index, Institutional Class VSIIX vs. M*'s Small Value Total Return Index (graph), and Vanguard Small Cap Index InstitutionalPlus Class VSCPX vs. both the Russell 2000 total return and the M* US Small Cap Total Return Index (graph)
You can add your fund(s) of choice to these graphs. They don't require Flash (google seems to require Flash, and I've uninstalled it on my machine).
Not surprisingly, the Russell 2000 index significantly underperforms the M* index. The Russell 2K is especially susceptible to front running (because it is widely followed, because it contains small caps that are more sensitive to price movements, because it reconstitutes annually). What is IMHO more interesting is that the fund ever so slightly outperforms even the M* index.
Regards,
Ted
QRSVX:
http://money.usnews.com/funds/mutual-funds/small-value/queens-road-small-cap-value-fund/qrsvx