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Small Caps

Is it too early for a long term (10-15 yrs) investor to reallocate to small caps? The SCG landscape has been beaten down and some of the most reputable MF/ETFs have fallen to the middle of the pack (performance-wise). I've owned BCSIX for over 10 years and looking back, glad I took profits when I rebalanced (several times). Also, own PRNHX and the recent 3 yrs has been tough due to the Fund's aggressive nature.
Any MF/ETF's that you are considering or own?
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Comments

  • Aegis value AVALX if you are ok with the commodity heavy weights.
  • AVUV seems pretty solid.
  • edited November 2023
    Personally, I'm not interested in SC Growth. Too volatile for me. I'd rather go the value route where valuations are lower. I have held SC Value fund, QRSVX, for a quite a while. Bought into a SCV ETF, AVUV, about a month ago and have been adding small doses periodically. CALF, mentioned in another thread, looks appealing to me also.
  • edited November 2023
    I own VTMSX in the small-cap blend category.
    Like Mike M, I am also not very interested in small-cap growth funds.
    Many small-cap growth funds are just too speculative for me.
  • Yes, I steer clear of small cap. It's the volatility. But looking at the portfolio in AVALX, I uncovered Ardmore Shipping out of Bermuda. Looks interesting to me. I don't want to be TOO diversified. "Diworsification," eh? But I have a long way to go before that's a concern. ASC. The company operates with a variable dividend policy, so the pay-out is prudent, in line with the current level of profit. Shorts are at just 2% of the float.
    https://www.morningstar.com/stocks/xnys/asc/dividends
    https://www.stockrover.com/world/insight/summary/Quotes/ASC
    https://www.tipranks.com/stocks/asc
  • It is hard to know "WHEN" it is a good time. Timing decisions in-retrospect has been either too soon or too late but there is always an uncertainty at the moment. I see diversification benefits from small caps but you need to dedicate a portion that you are conformable with and rebalance as that portion gets bigger or smaller (choose a period of rebalancing, 6 months would be a good option IMHO) By using rule based system, you don't have to ask yourself if it is the best time. In investing, perfection is the enemy of good enough returns.
  • @Investor Your last sentence, " In investing, perfection is the enemy of good enough returns. " What would you consider, good enough return, 5% , 10% & in what time space ? I'm sure age of investor would have something to be considered.

    Thanks for your time, Derf
  • edited November 2023
    10-15 year time frame? But thinking of making what amounts to a tactical decision? If you have a long range plan in place you shouldn’t have to make this type of decision. Rather, you’d be considering rebalancing and possibly adding to beaten-up small caps - or perhaps slightly overweighting those that you already own.

    To quibble a bit, I consider 10-15 years intermediate term , but not long term (20-30 years). To wit - it’s largely a matter of semantics. There’s been some discussion of small caps on the board. I’ll try to link something. Truth is - it all depends on the economy and the direction of interest rates. If rates continue to decline small caps should benefit as they need easy access to the borrowing trough and tend to borrow at higher rates.

    I’d have about 3-5% of my money tilted toward small caps myself. The thing is - When they jump … it’s often by a lot. So, if you feel like gambling, throw a little that way and let it ride. But check what you already own and make sure you’re not already exposed to the sector through some existing funds.

    https://www.mutualfundobserver.com/discuss/discussion/61579/it-s-almost-time-to-buy-small-caps#latest
  • Yes, indeed: fund managers might surprise you! My portfolio X-Ray shows:

    9% in small value and
    5% in small blend.

    How much of that 14% is the result of my own single-stock selections? It almost doesn't matter, eh? If what I really want is to AVOID small caps altogether? Just, "never say never." I'm pleased with what I hold. Otherwise, why hold those things?
  • I own 2 small/mid cap funds and am happy with both…. Virtus kar small cap core is about a 6% position and NEAGX is a 1% position. The first is small/MidCap blend and the second is small cap growth. The Virtus fund Is only available in some 401(k) accounts.
  • edited November 2023
    Triavarte's Adam Parker was interviewed on CNBC Closing Bell Friday. The video is available via CNBC Pro (fee) which I do not subscribe to.
    https://www.cnbc.com/video/2023/11/10/pro-watch-cnbcas-full-interview-with-trivariates-adam-parker-and-requisites-bryn-talkington.html

    Included was a discussion of small caps. He stated (paraphrasing) we are at least 3-6 months away in this bizness/market cycle from SCs being a proper/correct play.

    That said, scoping of all (NTF and TF) SC MFs available via Fido shows the fund families (named a few below) I'd be interested in if I was interested in SCs :

    https://fundresearch.fidelity.com/fund-screener/results/table/morningstar-rankings/mstarCategoryRank3Year/asc/1?assetClass=DSTK&category=SB,SG,SV&order=assetClass,category

    Aegis
    DWS
    Hennessy
    Kinetics
    Oberweis
    Bridgeway
  • What happens in 10 or 15 years?

    I like smalls, and always hold some. I wish I had owned FMIMX all that time. But it always looked so boring. M* calls it a mid-cap, but it's currently 67% small. I own some now, and I expect to buy more in the future.

    I own RWJ, and I am looking at CALF. Both are on the lower end of the debt/equity ratio, as is FMIMX for that matter.

    Keep in mind that any etf based on the S&P 400 will tick the small cap box for M*. In that space I own XMHQ. It also has a low D/E ratio, as do most things on my shopping list. Seems to me that the current environment encourages an eye on debt exposure.

    I am keeping an eye on GRPM to see how Invesco's GARP strategy works in that space. Until recently it was an equal-weight 400 fund. I have been pleased with SPGP, which has a longer track record, but in the 500.

    Buy now, or wait? I might do some early shopping in the taxable, but mostly I think I'll wait till the budget mess is settled.
  • Crash said:

    Yes, I steer clear of small cap. It's the volatility. But looking at the portfolio in AVALX, I uncovered Ardmore Shipping out of Bermuda. Looks interesting to me. I don't want to be TOO diversified. "Diworsification," eh? But I have a long way to go before that's a concern. ASC. The company operates with a variable dividend policy, so the pay-out is prudent, in line with the current level of profit. Shorts are at just 2% of the float.
    https://www.morningstar.com/stocks/xnys/asc/dividends
    https://www.stockrover.com/world/insight/summary/Quotes/ASC
    https://www.tipranks.com/stocks/asc

    Speaking of ships, I see Matson popping up in the top ten holdings of some of my screening results. Separation from A&B seems to have worked out for them.
  • edited November 2023
    Crash said:

    Yes, indeed: fund managers might surprise you! My portfolio X-Ray shows:
    9% in small value and
    5% in small blend.

    Yup. Just checked a 40/60 TRP fund of funds I own. Its benchmark allocation for the 3 small cap stock funds it holds (including PRNHX) is about 2.7% / As of June ‘23 it was at about 2.5%%. That doesn’t move the needle much in my case, as that holding is only 10% of portfolio. But I do own a bit over 3% inside a conglomerate / holding company which is focused in the small cap area.

    Out of curiosity, checked Price’s growth oriented fund of funds, PRSGX. Didn’t this one used to be called “Spectrum Growth”? Now it carries a different name. Anyhow, their most recent report gives a range of 0-25% allocated to small cap funds. But the fund was holding only 10% actual as of June ‘23.

    Perhaps relevant to the discussion is the possibility / desirability of investors like KHaw24 considering some good allocation funds (They come in a variety of flavors) fitting one’s risk profile and allowing the manager(s) to make those decisions? I think small caps are fertile ground for patient investors; but they can give you whiplash over shorter periods.
  • edited November 2023
    Derf said:

    @Investor Your last sentence, " In investing, perfection is the enemy of good enough returns. " What would you consider, good enough return, 5% , 10% & in what time space ? I'm sure age of investor would have something to be considered.

    Thanks for your time, Derf

    It is hard to pin a absolute value for the good returns. For different decades there has been different good returns. Sometimes 1% is a good return for a decade and 20% is a bad return for another.

    If you look very long periods say rolling 15-20 years, good returns have been around 7-9% range which include multiple crashes and booms. If your time horizon is not that long or you cannot accept the volatility of such long periods, then good returns associated with reduced portfolio risk will also be less.
  • My go to is DFAT.
  • I also own NEAGX/NEAIX for SCG coverage. ER is high, especially for retail shares. Otherwise, no reservations. SCV is a head-scratcher. CALF has a lot going for it and Pacer Funds, which include COWZ, are exemplary in explaining their free-cashflow methodology. DSMC has a similar approach but with a screen to weed out companies that carry too much debt, a concern for SCs when interest rates are high. DSMC does not have as long a track record as CALF, but I've overlooked that factor in my personal choice. AVUV holds too many positions for my money.
  • BenWP said:

    I also own NEAGX/NEAIX for SCG coverage. ER is high, especially for retail shares. Otherwise, no reservations. SCV is a head-scratcher. CALF has a lot going for it and Pacer Funds, which include COWZ, are exemplary in explaining their free-cashflow methodology. DSMC has a similar approach but with a screen to weed out companies that carry too much debt, a concern for SCs when interest rates are high. DSMC does not have as long a track record as CALF, but I've overlooked that factor in my personal choice. AVUV holds too many positions for my money.

    I like the funds following the cash these days. I'll add DSMC to my watch list, for as long as it might last at M*. But I generally like to see the thesis in action for at least five years in this up-and-down era.

    People can checkout DSMC's overlaps here. It's not what I expected.

    After years of bloated Vanguard indexes, I get what you're saying about too many holdings.
  • @WABAC, it's the non-selectivity of SC indexes that is the problem (not just Vanguard index funds). This is true of R2000 and Extended-Market/Completion indexes (Total market minus SP500 or R1000). In being comprehensive, these SC indexes have lots of garbage - up to 40% of companies are losing money. To many pure indexers, this is fine as they object to any index modifications.

    IF indexing SC, a better index is S&P SC 600 with ETFs IJR, SPSM.
  • edited November 2023

    @WABAC, it's the non-selectivity of SC indexes that is the problem (not just Vanguard index funds). This is true of R2000 and Extended-Market/Completion indexes (Total market minus SP500 or R1000). In being comprehensive, these SC indexes have lots of garbage - up to 40% of companies are losing money. To many pure indexers, this is fine as they object to any index modifications.

    IF indexing SC, a better index is S&P SC 600 with ETFs IJR, SPSM.

    Even then I prefer more selective index slices than provided by cap-weighting alone.

    And I never gave up on active management. The main issues have been availability and cost. Active etf's solve that. And it seems that people are interested.
  • edited November 2023
    stillers said:

    Triavarte's Adam Parker was interviewed on CNBC Closing Bell Friday. The video is available via CNBC Pro (fee) which I do not subscribe to.
    https://www.cnbc.com/video/2023/11/10/pro-watch-cnbcas-full-interview-with-trivariates-adam-parker-and-requisites-bryn-talkington.html

    Included was a discussion of small caps. He stated (paraphrasing) we are at least 3-6 months away in this bizness/market cycle from SCs being a proper/correct play.

    .....

    Ooopsy! With the RUT UP almost 5% today, so much for that projection!
  • Gotcha. But as I always say: be prepared for tomorrow's snap-back. And if Adam Parker was being interviewed at the end of the day, he could see what the Russell was doing, too. .... I hope and expect BRUFX jumped upward today. It's full of midcaps. More than I realized, when we got in....
  • Crash said:

    Gotcha. But as I always say: be prepared for tomorrow's snap-back. And if Adam Parker was being interviewed at the end of the day, he could see what the Russell was doing, too. .... I hope and expect BRUFX jumped upward today. It's full of midcaps. More than I realized, when we got in....

    Not sure about a snap-back today given the primary driver of yesterday's POP and today's soft PPI data. Today looks to be more like backfilling, follow through and maybe even a little FOMO.

    Not sure what you mean about Vitale - he made those comments at close of market last Friday, not yesterday.

    BRUFX, a MCV fund, was only UP 1.66% yesterday.
  • edited November 2023
    Just took a look at a legendary small cap offering from TRP (PRNHX). Recall when it was a stand-out performer (under a manager who later left and struck out on his own) and shut its door to new investors more than a decade ago, leaving many clamoring to get in. (Looks like they’ve reopened it.)

    … Up + 57.7% in 2020 / Down - 37% in 2022. I have to ask - Who in their right mind would want to own something like that? ISTM you’d have to have ice in your veins. FWIW - M*’s analysts award it a “silver” rating, their second highest.

    Suppose funds like that are great for speculating. But a difficult long term hold. Brings to mind @Mark’s recent quip about being left without a chair when the music stops.
  • hank said:

    Just took a look at a legendary small cap offering from TRP (PRNHX). .... ice in your veins... FWIW - M*’s analysts award it a “silver” rating, their second highest.

    Suppose funds like that are great for speculating. But a difficult long term hold. Brings to mind @Mark’s recent quip about being left without a chair when the music stops.

    Precisely why I'm not biting. I will own no dedicated small-cap funds, going forward. I haven't, for quite a while now. "It's the volatility, stupid!" Some of my fund managers have me up to 13% of total equities in small caps. That's more than enough for me. Maybe BRUFX has something to do with that? Wife's T-IRA.
  • @Crash : No judgement, just a comment. From prior posts , You're looking for a hand off to your wife due to age difference. For that reason I see nothing bad in holding 10 to 15 % in SC, SV, or a blend of the two.
    Just my 2 cents, Derf
  • edited November 2023
    Derf said:

    “ … I see nothing bad in holding 10 to 15 % in SC, SV, or a blend of the two.”

    That’s a reasonable assessment @Derf. For a disciplined investor adhering to a well thought out model portfolio and rebalancing from time to time, a 10-15% allocation to a keg of dynamite like that (+58% / - 37%) could make sense. I fear the average retail investor would buy high and sell low. That’s all. Suppose I own a few dynamite holdings myself - but in very small quantity.

    As a 30-35 year veteran of TRP’s funds (and remembering the “hay-days” of PRNEX PRNHX it’s difficult to understand how that fund could have lost so much in 2022. Wondering if investor outflows played a part …
  • Lots of small cap growth funds got creamed in 2022. QQQ lost 32.58 if we can believe M*. It was a rough year.
  • Thanks for the input, all. Yes, I'm not going to panic at what my presumably smart fund managers have done. And as mentioned above: BRUFX has a 30% stake in mid, small and micro-caps. But 32% right now in CASH??? Holy.....
    Re: PRNEX: I'm just a hair from break-even. Big December dividend coming.
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