A Case for Small Caps?

JonGaltIII

I know it sounds crazy to even ask the question given the market but consider this:

More than 45% of Nasdaq stocks are down 50% 1 in 2!
More than 22% are down 75%
More than 5% are down 90%

The current buyers of tech stocks are purchasing a 60% “discount” to what they were a few months ago. The indexes are faring better only because of the mega cap tech companies: Apple, Tesla, Google and Microsoft as they are approaching 40% of the index. They are generating so much cash and keeping the indices a float. So, if you’re a bear on the Nasdaq at this point… you are saying you are bearish on those four companies. The rest of the Nasdaq has already been decimated. This started around Nov of last year. Given this, are we at the bottom? If so, is now the right time to invest in small cap? Open to thoughts…

carew388

Perhaps SOXX SMH or VBK would meet your needs-if the market keeps going down you could sell these etfs as necessary with no additional fees.

Crash

I don't like small-caps' typical volatility anymore. Just very unsatisfying. I used to hold Mairs & Power Small cap. MSCFX and TRP small cap PRDSX. Still hold just enough of PRIDX smid cap foreign so that TRP won't tell me to add more, because of required minimums. Ya, I suppose it's a bargain now in relative terms, but I don't have the patience. I'm looking more and more for dividend payers. This Market is a stinker, these days, compared to the juiced-up version we had enjoyed only very recently. I want the benefit of some real compensation now, in retirement, until things turn around for the better. Never have put money into a MLP before, but I'm eyeing one at the moment.

yogibearbull

Media is reporting that Nasdaq Comp is in a bear market (more than 20% decline from recent high). But small-caps are ALSO in a bear market from their highs on 11/8/21. And look at that SC-growth stinker. Mid-March low didn't hold, so be careful.

Small-caps IWM, IWO (growth), IWN (value) from 11/8/21 highs (chart may default to 1-yr). https://stockcharts.com/h-perf/ui?s=IWM&compare=IWO,IWN&id=p93474469989

BenWP

@JonGaltill: I am reluctantly facing the fact that my current SCG funds would have to rally an amazing amount to get me back to level. The arithmetic is against me.

SCV has had some success, notably Bridgeway’s BRSVX. Charles’ write up on bond, equity, and alternative funds above water this year mentions Aegis Value. The manager looks to be a genius by transforming AVALX into a highly concentrated fund, 71% basic materials and 23% energy; that is not a diversified fund in my mind’s eye. The value equity funds that showed some success YTD all hold big energy positions. My fave, one that did not make the list, is GQEPX, up 6% YTD. It is wrongly classified as a LCG fund by M*, but the holdings tilt towards value.

The managed futures egg heads really look like geniuses this year; several AQR offerings and PIMCO’s PQTAX are shooting the lights out. However, those are funds I have never considered for purchase because they were real plodders for many years and my understanding of what they do is inadequate. PQTAX holds 40% in the home town commodities fund; will the PMs of these concentrated funds be able to turn their ships around quickly when the prices of « stuff » return to earth? Will alternative funds resume their pedestrian ways when the current crisis wanes?

johnN

***Open to thoughts…***
Hello
Nobody knnow for sure, look at 2008-2009 ( downtrends for 7 8 months) and 2020 flash covid crash (stocks continue downtrend 6 -7 wks). We may have another 10 15% haircuts, very difficult to tell. I am holding pattern have not add much past few weeks. When you see trends reverse you have plenty opportunities to add more uptrends maybe in 3- 6 weeks

Friends say watch sp500 @ 3900-3970 major resistance levels, if break more pains ahead next few weeks to 3600.

I understand your points exactly, SMALLCAPS so cheap now and we want to be jumpy...if you have a long term (can stomach -stand the pressure) horizon maybe just pour small amounts in testing waters slowly....our 401k still 90/10 every 2 weeks no changes since 2006 and we did very well. 4 5 months downtrends nasdaq very hard to stand

MikeM

When you talk small caps you will have to specify between value and growth. It is growth that is down (same as LC). Small cap value is actually holding up quite well. Vanguard SC value, VBR, is only down -7.3% YTD. Better than a balanced fund. SC growth on the other hand, VBK, is down -24.1%.

BenWP

I tried to make that point, @MikeM.