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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: 2sigma who wrote (1717)10/25/1998 6:51:00 PM
From: Jeffrey D   of 15132
 
Scott, the following is an excerpt from an AP story dated today and it might provide more information to you in your search for a small cap mutual fund that tracks the Russell 2000. Good luck. Jeff

<Of course, meaures like P-Es aren't uniform throughout the stock market, but vary widely from one stock to the next. Many bargain hunters are drawn especially to small stocks, which have suffered much more severely than big stocks at the hands of the bears.

''Small stocks have never been as deeply oversold and undervalued as now,'' declares L. Keith Mullins, emerging-growth analyst at the brokerage firm of Salomon Smith Barney Inc.

By Mullins's reckoning, the stocks in the T. Rowe Price New Horizons Fund -- a common proxy used by many Wall Streeters to represent small stocks as a class -- recently traded at a price-earnings ratio 15 percent BELOW that of the S&P 500.

The historical range of this indicator over the past 35-plus years has been between parity and twice the S&P 500 P-E, reflecting the fact that small stocks as a group tend to record faster earnings growth than big stocks over time.

''There are only two other occasions where the fund sold at any discount whatsoever to the P-E on the S&P 500 -- in 1977 and in 1990,'' Mullins says. ''Subsequent to both events, the New Horizons fund sharply beat the returns posted by the S&P 500 over a one-year, three-year and five-year horizon.

''Following the 1990 low, small growth stocks advanced 91 percent over the next 18 months, as strong earnings growth and expanding valuations combined to fuel a powerful rally.''>>

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