Ya! Price is UP from yesterday's close. Here is something from the Bloomberg site on small cap's vs LARGE. Someday, someday THQI will get the respect it deserves. Seems like other small cap's, also with 25-30% growth rates, are drifting down as well.
Money Column
Thu, 22 Apr 1999, 12:56pm EDT
Small Stocks' Rally Likely to Fizzle
New York, April 21 (Bloomberg) -- Small stocks are
outperforming big ones this month, after trailing for five
years.
Enjoy it while it lasts, say market strategists.
''Portfolio managers need more money to put into small
caps, and investors aren't giving it to them,'' said Claudia
Mott, director of small-stock research at Prudential
Securities Inc. ''It's going to take a significant
correction that lasts more than a couple days'' in big
stocks before smaller ones have a chance at a sustained
rally, she said.
The small-capitalization group benefited in recent
weeks as investors looked for stocks that were relatively
inexpensive compared with the computer shares that dominated
the market for the last few years. The Russell 2000 Index,
considered the best measure of small-stock performance, is
up 6.6 percent in April, while the Standard & Poor's 500
Index has gained 2.5 percent and the Nasdaq Composite has
dropped 0.1 percent.
Yet the Russell 2000 still languishes 14 percent below
its record of 491.41, set a year ago today. The S&P 500 is
up 17 percent since then, while the Nasdaq has gained 29
percent. And that's how it has been for the Russell for the
past five years, as investors poured money into large growth
stocks, including technology- and consumer-related shares.
It last beat the S&P 500 in 1991 to 1993.
Money Flow
There are still plenty of reasons to favor large growth
stocks. Small stocks do best when the economy is rebounding
from a slump, and the U.S. economy is in its ninth year of
expansion. Investors remain wary of small stocks, which
often have lower trading volume and are more difficult to
buy and sell in large blocks, said Mott.
''A lot of people are reluctant to get heavily invested
in such an illiquid market,'' she said. ''They've been
pulling money out of small-cap funds hand over fist for the
past six months.''
From Oct. 15 through April 15, small-cap funds had an
outflow of 8 percent, while big-cap funds had inflows of 23
percent, according to funds tracked by TrimTabs.com
Investment Research in Santa Rosa, California.
Small-cap funds had outflows of 12 percent in the prior
six-month period, compared with inflows of 13 percent for
the index funds, said Carl Wittnebert, director of research
at TrimTabs.
Big Is Beautiful
The average stock in the Russell 2000 is worth about
$592 million, and the largest has a value of about $1.4
billion. By contrast, Comcast Corp., the best-performing
stock in the S&P 500 this month, is valued at $23.9 billion.
Mutual funds prefer large stocks because they need to
match the performance of benchmark large-capitalization
indexes -- which, after all, have been doing better for a
long time.
''The name of the game today is to keep up with the S&P
500 and you have to have a hefty, hefty weighting in the
large-cap stocks to compete,'' said Jim Floyd, a senior
analyst at Leuthold Group, a Minneapolis research firm.
In the last few weeks, the misfortunes of big computer
companies made some investors think that the balance had
finally shifted in favor of small companies. Top performers
such as Compaq Computer Corp. warned earnings would miss
expectations and Dell Computer Corp. announced disappointing
sales. Dell, the S&P 500's top performer in 1996, 1997 and
1998, lost 35 percent of its value in the past several
weeks, while Compaq tumbled more than 50 percent.
''People are looking at the market to see what's
available besides Dell,'' said Ronald Doyle, chief small-cap
fund manager at Banc One Investment Advisors Corp. in
Columbus, Ohio, which manages $120 billion.
Optimists
Some money managers are still hoping the recent rebound
in small stocks is the real thing. They argue that many
small companies are enjoying strong earnings, with price-
earnings ratios far below those of large growth stocks.
''We're going to look back in a couple of years and
say, 'Those small-caps were so cheap, it was so obvious,'''
said Suzanne Zak, chief executive at Zak Capital Management
Inc. in Minneapolis.
The 40 small- and mid-cap companies in her $650 million
portfolio are posting average profit growth of about 25
percent a year, she said, yet the stocks sell only for about
12 to 14 times expected earnings. The average stock in the
S&P 500 trades at 25 times estimated earnings.
Zak recently bought shares of Omnicare Inc., which
sells pharmacy services to nursing homes. The company is
expected to have 25 percent to 30 percent annual profit
growth and has been meeting or beating expectations, Zak
said. Still, the stock slid 43 percent from its 52-week high
last July.
Buying Power
Mike Weiner, who oversees balanced funds at Banc One
Investment Advisors, doesn't dispute the liquidity problem
in the small-cap arena. He says the rally can continue if
investors stay focused on finding strong businesses with
decent valuations.
''The liquidity hasn't changed, but all it takes is a
little bit of interest'' from investors to lift small-caps'
performance, Weiner said.
It would take 7.6 percent of the $10.5 trillion
invested in the S&P 500 to buy the entire Russell 2000,
which is worth about $800 billion.
Still, while some small companies may boast outstanding
earnings, that's not true of the group as a whole.
''There's no evidence yet that there's earnings growth
there to support a rebound'' in small-cap stocks, said Chuck
Hill, director of research at First Call Corp., a New York-
based firm that tracks analysts' profit forecasts. ''I'm not
very optimistic that the Russell is going to outperform the
S&P, given its history.''
Earnings for companies in the Russell 2000 have lagged
those of the S&P 500 every quarter since the second quarter
of 1998, even though analysts always forecast the index will
do better, Hill said. ''The Russell hasn't been
outperforming, but that's been the forecast every freaking
quarter.''
Rosy Forecasts, Again
For the first quarter, companies in the S&P 500 are on
track to report 7 percent earnings growth, compared with a
decline of 6 percent for the Russell 2000. Ever-optimistic
analysts expect 17 percent for the Russell in the second
quarter, and just 12 percent for the S&P 500.
Frank Russell Co., which operates the Russell indexes,
determines membership every May by ranking all U.S. common
stocks from largest to smallest market value. The largest
1,000 stocks become the Russell 1000 and the remaining 2,000
become the Russell 2000. Excluded are stocks trading below
$1, over-the-counter bulletin board stocks and foreign
stocks.
While large growth-stocks still lead the popularity
stakes, Prudential's Mott isn't ready to give up on the
small caps.
''This is like watching my kids learn how to walk,''
she said. ''You know great things are going to happen
eventually, but those first few steps are shaky.''
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