Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
VTMSX, PRSVX, IYSIX are doing ok. All small caps have struggled a bit in the last 1 month, but those with less tech exposure have lost less than others. This would echo the NASDAQ during the same time period. That's why we have diversified portfolios.
For what interest it holds, the distribution of one year and five year returns across all domestic equity funds. The highlights just the funds with the top 10% of returns, not by category but across all domestic equity.
One year shows a clear preference for large value (though YTD it's more evenly distributed across the large cap valuation spectrum). Five year shows a clear lack of interest in large value. In both cases, a reasonable number of managers in every quadrant excel.
WSCVX Walthausen Small Cap Value. This is an outstanding record compared to other similar funds . Whats the story about this fund. Morningstar has no analysis on this fund. prinx
Mr. Redleaf is, in fact (as David points out in October letter), shorting small caps in his Whitebox Tactical Opportunities Fund WBMIX, which I do own.
Here is his justification, from June '12 Market Commentary:
"Far better than the “pure” hedge is the hedge that is also an investment. Consider our current shorts on the Russell and individual small caps. The primary reason for those positions is that we are betting against small caps vs large caps. We expect large and small caps to move in opposite directions and to make money as a result. So it might seem odd to call this position a hedge on a portfolio that is heavily exposed to large cap stocks. The reason it is a hedge is that although the S&P and the Russell may move opposite to each other in normal, reasonably calm markets, in a real market collapse they almost always move together. Thus if catastrophe strikes and the market drops 20% in a month we expect our small cap shorts to give us some downside protection against our large cap losses. Between the shorts and our cash, a disaster for the market could be a blessing for us because we would be in an excellent position to buy.
Our small cap short position (and even to a lesser extent our cash position) reflect our view that the best hedge is not a pure (and costly) insurance policy. The best hedge is an investment position we put in place on its own merits, but which has the additional benefit of balancing the portfolio so that in the event of market turmoil not every investment we hold moves in the same direction."
Well perhaps so or perhaps small caps might have been just working off an overbought condition and are now getting ready to stage a rally off of support.
I am finding a set up formation forming from my charting analysis for the Russell 2000 coming off of its support line of 820 which was its July and August highs. It has been in retreat off its mid September high of around 870 and is close to the 820 support mark. Hopefully, the support line will hold and we will have a nice small cap rally in the near term.
I am finding the small cap etf IJR is up ytd 12.25% through October 15th. In comparison my three small cap funds PCVAX, PMDAX and KSDVX are up 6.75%, 11.75% and 12.25% respectively. That is one of three keeping pace with bogey and the second one is close behind while the third one is trailing by a good bit. However, all three provide a nice dividend and even when combined their yield trumps that of the index.
The near term upside for the Russell 2000 Index from my thinking is possibly six percent before it reaches its former September resistance line and since this will be the third attempt for a breakout ... Well, we might just see a little more upside. It will be interesting to see how the market reacts to the Presidental debates, earnings season plus a few other current event things as they could be the spoilers.
In addition, from my research, I am finding that the Russell 2000 Index is selling on a Forward P/E Ratio of about 18 and a Trailing P/E Ratio of about 25. In comparison, I am finding the S&P 500 Index is selling of a Foward P/E Ratio of about 13 and a Trailing P/E Ratio of about 16. So with this, prices seem within normal uper ranges as small caps historically have been the more pricy of the two.
Note, I do not plan to make a special investment to play this anticipated small cap rally. Sometimes it can be enjoyable to just sit and watch. Besides, I got three good funds in the chase and in time I might add a small cap index fund for good measure and cull one of the others.
My experience is that small cap funds can have most impressive records when they are relatively new and have a small asset base, but it is much harder to put out great numbers on a consistent basis when the fund is discovered and gets bigger. And fund companies tend to let assets roll in even when it is clear that performance has already started to lag. Some managers are better at handling large asset bases than others. I think manager selection is even more important with small cap funds. Whitebox is certainly not a small cap fund, although its strategy is intriguing. I would like to see how management handles a large asset base, not just the measly $18 million it currently has, before I would commit dollars to it, but it is interesting. Walthausen has a good performance record, with extra-high alpha and accompanying high beta. Upside is strong, but downside is less endearing. But the fund has some attraction. It's great to see a large number of quality small cap managers who have demonstrated an ability to beat their indexes.
In checking the charts, I am finding that the R2000 has now moved above its 20 DMA, the Slow Stoch has completed and according to the MFI money is returning. If the trend continues the MACD will soon complete and then the four elements that I watch will all be positive. Three of the four ain't bad either.
Have a great day ... and, "Good Investing." Skeeter
Comments
Kevin
One year shows a clear preference for large value (though YTD it's more evenly distributed across the large cap valuation spectrum). Five year shows a clear lack of interest in large value. In both cases, a reasonable number of managers in every quadrant excel.
For what it's worth,
David
prinx
http://www.mutualfundobserver.com/2011/09/walthausen-small-cap-value-fund-wscvx-september-2011/
Here is his justification, from June '12 Market Commentary:
"Far better than the “pure” hedge is the hedge that is also an investment. Consider our current shorts on the Russell and individual small caps. The primary reason for those positions is that we are betting against small caps vs large caps. We expect large and small caps to move in opposite directions and to make money as a result. So it might seem odd to call this position a hedge on a portfolio that is heavily exposed to large cap stocks. The reason it is a hedge is that although the S&P and the Russell may move opposite to each other in normal, reasonably calm markets, in a real market collapse they almost always move together. Thus if catastrophe strikes and the market drops 20% in a month we expect our small cap shorts to give us some downside protection against our large cap losses. Between the shorts and our cash, a disaster for the market could be a blessing for us because we would be in an excellent position to buy.
Our small cap short position (and even to a lesser extent our cash position) reflect our view that the best hedge is not a pure (and costly) insurance policy. The best hedge is an investment position we put in place on its own merits, but which has the additional benefit of balancing the portfolio so that in the event of market turmoil not every investment we hold moves in the same direction."
Well perhaps so or perhaps small caps might have been just working off an overbought condition and are now getting ready to stage a rally off of support.
I am finding a set up formation forming from my charting analysis for the Russell 2000 coming off of its support line of 820 which was its July and August highs. It has been in retreat off its mid September high of around 870 and is close to the 820 support mark. Hopefully, the support line will hold and we will have a nice small cap rally in the near term.
I am finding the small cap etf IJR is up ytd 12.25% through October 15th. In comparison my three small cap funds PCVAX, PMDAX and KSDVX are up 6.75%, 11.75% and 12.25% respectively. That is one of three keeping pace with bogey and the second one is close behind while the third one is trailing by a good bit. However, all three provide a nice dividend and even when combined their yield trumps that of the index.
The near term upside for the Russell 2000 Index from my thinking is possibly six percent before it reaches its former September resistance line and since this will be the third attempt for a breakout ... Well, we might just see a little more upside. It will be interesting to see how the market reacts to the Presidental debates, earnings season plus a few other current event things as they could be the spoilers.
In addition, from my research, I am finding that the Russell 2000 Index is selling on a Forward P/E Ratio of about 18 and a Trailing P/E Ratio of about 25. In comparison, I am finding the S&P 500 Index is selling of a Foward P/E Ratio of about 13 and a Trailing P/E Ratio of about 16. So with this, prices seem within normal uper ranges as small caps historically have been the more pricy of the two.
Note, I do not plan to make a special investment to play this anticipated small cap rally. Sometimes it can be enjoyable to just sit and watch. Besides, I got three good funds in the chase and in time I might add a small cap index fund for good measure and cull one of the others.
Have a great day ... and, "Good Investing."
Skeeter
In checking the charts, I am finding that the R2000 has now moved above its 20 DMA, the Slow Stoch has completed and according to the MFI money is returning. If the trend continues the MACD will soon complete and then the four elements that I watch will all be positive. Three of the four ain't bad either.
Have a great day ... and, "Good Investing."
Skeeter