Advertising

The Seattle Times Company

NWjobs | NWautos | NWhomes | NWsource | Free Classifieds | seattletimes.com

The Seattle Times

Business / Technology


Our network sites seattletimes.com | Advanced

Originally published Friday, December 12, 2008 at 12:00 AM

Comments (0)     E-mail article     Print view

Analysis

With stocks, time to think small

While small-company stocks typically lead the way out of bear markets, a more important reason to invest in the category is long-term performance.

The Associated Press

Analysis |

While small-company stocks typically lead the way out of bear markets, a more important reason to invest in the category is long-term performance. Small-capitalization stocks — those with a market value of $3 billion or less — usually rally before large caps at the end of bear markets, and before the economy recovers, says Citi Investment Research analyst Lori E. Calvasina.

While she expects the small-cap Russell 2000 index, currently near 470, to rise to 550 by the end of 2009, she says it might first sink near its Nov. 20 low of 385.31 as weak fourth-quarter earnings trickle in. "While our analysis is not calling for a clear shift into smaller-cap stocks just yet, we continue to believe that the stage is being set for such an inflection point in 2009," she writes in a report.

Merrill Lynch strategist Steven G. DeSanctis says investors should always keep a small portion of their portfolios in small caps, as they tend to outperform large-cap stocks over time. "Although we spend an inordinate amount of time attempting to figure out if we are in the midst of a small-cap outperformance cycle or not, investors should focus more on the longer-term picture when making investment decisions," he says.

Large caps are considered safer during troubled economic times as they have more diverse revenue than small caps.

Some fund managers see good opportunities now, especially after the market's sharp drop in recent months. "Whenever you get into a market like this that hits every type of stock, small caps get hit the hardest," says Craig Hodges, portfolio manager for the multicap Hodges fund (HDPMX). He's looking at energy and infrastructure names such as KBR (KBR), Terex (TEX) and Atwood Oceanics (ATW).

Larry Mano, portfolio manager of the Schwab Core Equity Fund (SWANX), sees opportunities across all small-cap sectors, based on low valuations and relatively higher earnings growth expectations.

Copyright © 2008 The Seattle Times Company

More Business & Technology headlines...

E-mail article Print view      Share:    Digg     Newsvine

Comments
No comments have been posted to this article. Start the conversation.

advertising

Chase shrugs off loss of CD investors

Sunday Buzz: Expedia, Intelius, Classmates slapped by Senate report

Denny Triangle gains skyline, but tenants slow to come

Your Funds: Money for nothing: Some investors pay for advice they never get

Sunday Memo

Advertising

Video

LA Galaxy's David Beckham
Los Angeles Galaxy's David Beckham talks about the upcoming MLS Cup final during after a team practice.

Real Salt Lake's Kyle Beckerman
MLS trophy arrives in Seattle
Chittenden Locks Inspection
Interview with New Moon actors
Full interview with New Moon actors
Artistic Roller Skating
Girls Soccer: Mercer Island vs. Glacier Peak
Smash Putt! Miniature Golf
Opening day at Crystal Mountain

Marketplace

nwautos

2009's most fuel-efficient sedansnew
Choosing a new sedan? Weigh the impact of your choice on your wallet and on the planet.
Post a comment

Open Houses

Find this weekend's open house listings.
Or search by location:

 
Most read
Most commented
Most e-mailed
 
 
Advertising