Graham and Doddsville -- Value Investing In The New Era Message Board

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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era

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To: porcupine --''''> who wrote (1217)	2/9/1999 9:07:00 AM
From: Boyd Hinds	Read Replies (2) of 1722

Porc: Thanks for your comments. I am more interested in the sizable difference in returns in the micro-cap universe vs the larger caps. I have also read O'Shaughnessy's book "What works....." He has also looked at the contribution that market cap plays in the ability to beat the indexes. In one of his conclusions, he states that the average annual growth rate was highest among the stocks with market caps of <$25 million. The Loughran study would seem to indicate that the best way to play this micro-small cap segment is to find the best "value" candidates. The article in the NYT does not reveal exactly what constituted "value", but I assume it includes some of the traditional ratios like PEs, Book value, P/S, etc. I like to go a step further, and find those companies that are also growing sales, margins, and net profits at least 25% or greater. All I've read on the subject would seem to indicate that the best chance at garnering market beating returns (even risk adjusted) come from this micro-cap world of stocks.

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