FYI
July 5, 2018
Dear WEALTHTRACK Subscriber,
Many of you have taken advantage of the mid-week July 4th holiday and taken the remainder of the week off. We are among you! So this week we are revisiting a popular recent WealthTrack episode that speaks to the importance of portfolio diversification.
Our focus is international small cap stocks, but we also wanted to update you on the recent performance of their domestic counterparts. U.S. small cap stocks outperformed their larger brethren in the first half of 2018 after lagging in 2017. So new on our website this week, we are linking to an update from The Royce Funds’ Co-Chief Investment Officer, Francis Gannon. He explains what’s behind the surge and why it bears watching.
As our regular viewers know we and our guests are big believers in diversification, among geographical areas, asset classes, business sectors and securities. It’s a big, diverse investment world out there and we are always searching for opportunities especially in underappreciated and overlooked areas. This week we are focusing on a gigantic one hiding in plain sight.
It’s international small company stocks, and here’s what we learned about them courtesy of research from Royce Associates, which has specialized in small cap stocks for nearly half a century.
Only about 1% of mutual fund assets in the U.S. are invested in international small cap stocks, but there are more than twice as many foreign small cap stocks than there are U.S. ones in their respective indices, nearly 4800 versus less than 2,000 here. Not surprisingly, they have more than twice the market value, $5.4 trillion overall versus $2.5 trillion for the U.S. universe.
What about performance? Once again they seem to have an advantage. Royce looked at rolling annualized 10 year returns since 1996, when the benchmark, Russell Global Indexes were started. International small caps have delivered 8.3% annualized returns, versus 7% for American small caps and both of them substantially outperformed large cap stocks, whether international or domestic.
What about the volatility that small company stocks are famous for? It turns out that international small cap stocks have demonstrated less volatility than U.S. ones.
This week’s guest, David Nadel, runs a high performance international small cap fund which is starting to get some attention. Nadel is Lead Portfolio Manager of the Royce International Premier fund which he has managed since its 2010 inception. The fund is small but growing rapidly. It crossed the $100 million mark in 2017 and the $200 million threshold this year, and is expanding fast.
A major reason it is attracting investors is the fund’s track record. It has outperformed its international small cap benchmark for the last one, three and five year periods and since inception.
Royce International Premier is also rated 4-star by Morningstar and recently won an award from Thomson Reuters Lipper, another prominent mutual fund ratings firm, for its three year track record.
I asked Nadel why international small cap stocks have a better long term track record than U.S. ones, and why he think that history is poised to continue.
We also have an exclusive EXTRA interview with David Nadel about how he learned the power of recurring cash flows early. His Dad, Warren Nadel was a dentist by profession but was also a successful song writer, guitarist and singer who wrote a number of top ten hits for Elvis and performed with Chuck Berry as a guitarist and singer.
As always, if you miss the show on Public Television, you can watch it at your convenience on our website. You’ll also find my weekly Action Points there, plus our guests’ “One Investment” ideas.
We look forward to resuming our regularly scheduled programming next week. Until then, have a great weekend and make the week ahead a profitable and a productive one.
Best regards,
Consuelo
M* Snapshot RIPNX:
https://www.morningstar.com/funds/XNAS/RIPNX/quote.htmlLipper Snapshot RIPNX
https://www.marketwatch.com/investing/fund/ripnxRIPNX Is Unranked In The (F/SMC G) Fund Category By U.S. News & World Report:
https://money.usnews.com/funds/mutual-funds/foreign-small-mid-growth/royce-international-premier-fund/ripnx 
