Is it time for small caps?
Analysts rediscover a sector that was
overlooked as market soared in '96
From Correspondent Sean Callebs
April 3, 1997: 4:45 p.m. ET
Are small stocks
winners? - Feb.
21, 1997
Index funds not a
sure bet - Jan 31,
1997
Small caps worth
a look - Dec. 4,
1996
NEW YORK (CNNfn) - Small company stocks
bloomed last spring, but withered in the summer and
never joined in as the big company stocks rallied in
the fall and the early part of this year. But the current correction has caused analysts to review investment
strategies, and some are looking at a sector that was
ignored as the market roared to record highs: the
Russell 2,000 index of small-company stocks.
"The Russell started to show better pricing
resistance in down markets, and it looks like it could
participate better in some of the up markets," said
stock analyst Keith Mullins of Smith Barney.
"Generally, you try to watch sectors when the
markets get really tough, because stocks that don't
go down as much in down markets have a tendency
to do very well coming out of this period."
While the Russell has been falling slightly, last
week it lost just .79 percent compared to .94
percent for the Dow, and 1.3 percent for the S&P
500. But even analysts who favor small cap stocks
are posting warning signals. The stocks can be
volatile and they haven't turned around yet, but with
the large-cap indexes faltering, they see small caps as
a viable alternative.
"Once the Russell 2000 starts to move because it
is fundamentally more attractive, you'll see a lot of
money chasing limited market capitalization stocks,"
said James Awad, money manager for Awad
Associates. "You can get a very significant move in
the Russell 2000 in a very short time and I would
anticipate that happening starting very soon."
Still, it isn't always easy to get reliable information
on small cap companies, so some analysts
recommend focusing on firms with established track
records unless you have a personal knowledge of the
inner workings of a company or group of companies. |
