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Small-caps at all?



  • edited January 1
    Looking for some guidance here. As previously mentioned, I hold MSSMX and WAMCX and they have underperformed in 2021: 5.78 and 5.46. I noted @gk3105gklm comment about how he traded out of them as they are “ex champs”. Wondering what prompted that and when?

    Running MFO premium for CSMCX FCPGX MSSGX WAMCX and NEAGX and it’s clear that MFO also dropped my two funds to a 1 and 2 rating in 1 year performance. Side Note: Wouldn’t it be great to have MFO alert you when a fund in your watch list or port dropped in overall rating? Valueline did that. Would it be in time or advantageous?

    The rating drop was deserved based on this years performance. Sure. These two funds have highest risk in 1 and 3 year as well. 10 yr performance, MFO still doesn’t like MSSGX in terms of overall rating. It’s rated a 2 for 10 yr. I don’t recall that when I first evaluated. 20 year it’s a 5. FWIW: M* ratings based on past performance remain unchanged 5*.

    NEAGX is rated 5 for all periods. Wondering why this fund didn’t make my screening process. I’m still reviewing this.

    While I’m deciding whether to stay or make a change with these two funds, I’m equally as interested in learning how to better evaluate an exit or change. Not a momentum trader. “Consistent Underperformance” is somewhat subjective, no? Is that 1 year or 2 years if there’s been no change to mgmt or underlying fund strategy change. It could be what @BenWP said… just some bad choices in high flying small caps. What makes me confident that they will correct?
  • The more I analyze and perhaps "over analyze" - I think I may need to give my 2 SCG funds WAMCX and MSSMX some more time. Using MFO tools (especially the Analyze button / Performance / Rankings / Ratings and Batting Average etc.) - it appears that WAMCX, MSSGX and NEAGX all perform high and low and switch back and forth in terms of performance with similar Ulcer over LT. Small Cap growth for you. There's no clear winner, if you will. The youngest fund on my watch list in this cat, DVSMX only shows 4 years of performance and it's been consistent. Perfect FCI. Ferguson Metrics FCI would lead me to conclude WAMCX is better than MSSMX but DVSMX (young fund) is best so far if I'm understanding it correctly. Not being declarative so if someone has a difference of opinion, I’m open to it.

    Pro Tip for MFO Discussion Search: Use oldest share class symbol and you're likely to turn up more meaningful results.
  • @JonGaltIII, since you brought it up, I think you may be over analyzing. Just a question, why are you stressing over having "the best fund(s)" when there are absolutely no guarantees that the statistics will look the same next year or the year after? Isn't it all a guessing game, or at best an educated-guessing game anyway?

    I'm probably different than most on this board but I'd say pick your horse and jockey and ride it. If your jockey (manager) consistently beats an index fund, say VBK, or is in most years a top 20% performer in the category, you've done great. Don't second guess a well thought out choice because your likely to second guess that choice in a couple years too.

    Just my humble 2-cents.
  • Well put @MikeM
  • You need a lot of patience (or luck) to invest in small cap funds. Their returns vary widely among funds and from year to year with any particular fund. I’ve invested in small cap funds for about 30 years and they often have long spells of underperformance punctuated by incredible returns in relatively short spurts. I now get most of my SC exposure from index funds such as FSSNX. I would prefer IJR but it’s easier using Fidelity funds for rebalancing purposes.
  • I've taken my small-cap fund down to almost nothing, at 1.62% of portfolio. Why hang on at all? It's a closed fund. PRDSX. ...Ah, but I see it's re-opened. OK. Still doesn't change the fact that I don't like the volatility. Over the past couple of days, I've been diversifying my BONDS. New positions in TUHYX and PRFRX. Money taken from PRSNX and RPSIX.
  • @JonGaltill: one more factor to throw your way is the record of the fund manager(s) in their other vehicles. In the case of DVSMX, the 2 main managers are responsible for the very good micro-cap growth DMCRX, which has a longer record. I have not looked into the other funds you mentioned.

    I know it ain’t play money, but for me it’s a hobby whose satisfaction involves trying to pick the best in class. I slave over my old sports car; not so much to get more return in the event of a sale, but to hear knowledgeable people make positive comments.
  • I hold a constant above-average weighting in small caps in my Roth as SOP. My rationale is that in that account I have more time to ride out any volatility than in my 401k. T

    In my 401k I an also overwight smid's since there is also scuttlebut in respectable corners that large caps are over-valued and that there is less risk currently in smaller and mid-sized companies. Oakmark, Tweedy, D&C and other value-conscious shops seem to have moved more into smids during 2020 and early 2021 (but have rotated out since). I counter the smid overweight by holding a bit more cash, such that the simple weighted expected return is above that of holding larger caps.

  • Are the Faangs considered large cap or GIANT cap ?
  • FAANGS are Overlord Cap
  • Is that similar to GOD Cap?
  • The FAAANGS are bigger than God's ego.
  • @JohnGaltIII I bought WAMCX back in May of 2020 and it has been an excellent fund for me. Unfortunately as you've seen with interest rates rising funds like this with high PE multiples are susceptible to a great deal of risk. The fund was down 8-9% for the year earlier this week. I feel that in the current environment this fund and others in the small cap growth space will perform poorly. I have gone ahead and taken profits and plan to allocate to more defensive positions.
  • Thanks @MikeW … I’m still way ahead in WAMCX as well. Not so much with MSSMX. I am thinking I may exit WAMCX as well and take profits. I can’t research it in Fido anymore and I haven’t tried to add to it so I’m not sure if it’s possible.

    Does that mean you plan to stay out of all SCG this year?
  • Yes I'm pretty much out of small cap growth now. Too volatile and risky for me in this environment. I am expecting a significant correction sometime over the next year. I think tech is going to get hit hard. Already has happened to alot of the high flyers but I think more is coming. I have raised more cash but am also considering more defensive equity funds and stocks. I plan to buy some 3M in next few days.
  • edited January 14
    Wonder if we are late in the business cycle for smaller cap funds? With the possibility of several rate hikes this year and supply chain issue, I reduced my small cap % late last year and moved to more defensive positions.
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