Mendoza School of Business

Some expect big rally in small-cap stocks

Published: August 27, 2011 / Author: Cezary Podkul

Finance Professor Tim Loughran is quoted deep in this Washington Post article on small and large-cap companies. The following is an excerpt of the article. To read the entire article visit:  Some expect big rally in small-cap stocks

As the stock market lurched through August and fears of another recession took hold, many investors dived for safety, moving their money into gold or blue-chip corporate giants with large balance sheets.

Not David Wetherell. Betting that the economy will hold up, he went bargain hunting in small-cap stocks.

“A period like August creates a buying opportunity for us,” said Wetherell, who manages a fund at Cozad Asset Management dedicated to small-cap stocks, generally defined as those whose total market value is less than $3 billion.
Small-caps tend to outperform their larger counterparts when the economy is expanding and underperform when it’s shrinking. In the August sell-offs, they were walloped. To investors like Wetherell, that makes them all the more attractive.

While the jury is out on whether the nation is heading for a double-dip recession, the opportunity in these oft-neglected stocks has sparked a lively debate among professional investors.


Topics: Mendoza