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Strategies & Market Trends : Gorilla Game Investing in the eWorld

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To: Mike Buckley who wrote (826)	11/24/1999 5:06:00 AM
From: Bruce Brown	of 1817

Mike, One of the studies that I follow in terms of small-caps is done by the Leuthold Group. Yes, I agree that it has no value as we don't buy 'average' small-caps, 'average' mid-caps or 'average' large-caps. The study moves the companies out of the respective categories if they grow into or shrink into (heaven forbid) the next category. So Siebel would not be rated in the small-cap study as it is removed for purposes of collecting the data. It is very much a shorter term study on an annual basis that only reflects what the 'average' group is doing in comparison to the other 'average' group and is, of course, skewed for most practical purposes. I also wouldn't want to own an 'average' mutual fund for any cap group. Yet, if the 'average' large-cap has been able to grow earnings at double digit rates at this point in the economic cycle while the 'average' small-cap has only been able to grow at 5 to 7%, the data at least is valuable at telling us the 'average' big is getting bigger quicker than the 'average' small. That's just something to overlay on the investing cycle and why the large-caps have been the focus for investors since 1993. They are performing even at the 'average' level and the price appreciation reflects that. However, I will continue to search for well above 'average' small caps. Siebel and i2 were the fruits of 1998. I'm sure there will be other fruits going forward. I just get annoyed when I hear the small-cap specialists tout the "it's time for small-cap speeches". If they uncover gems like Siebel and i2 - great. There are a few analysts and firms that appear in Barron's on occasion that do point out some excellent 'above average' small-cap gems. BB

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