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Post by chang on Jan 3, 2023 14:47:34 GMT
That's what MFO seems to think: www.mutualfundobserver.com/2023/01/the-investors-guide-to-2023-three-opportunities-to-move-toward/Scroll down to "SMALL CAP STOCKS" Morningstar’s Lauren Solberg noted in December 2022 that “For smaller-company stocks, price/earnings ratios—a widely used measure for determining the value of a stock relative to its earnings—have reached their lowest levels in two decades.” The difference in P/E ratios between small-cap and large-cap stocks – 12.6 versus 20.2 – is the greatest since 2002. (Small Cap Stocks are Really Cheap, Lauren Solberg, 12/2/2022) The almost permanently skeptical GMO allows that “small-cap stocks have become notably cheap,” and RBC’s Lori Calvasina says that at current levels, small-cap stocks are already priced at valuations that would account for “the worst that you’d expect to see in the middle of a recession.”
Virtually all of the major management firms anticipate a decade of small-cap outperformance though the magnitude of the projected differences is huge. At the low end, Callan anticipates US small to outperform US large by 20 basis points (bps); BNY Mellon gives small caps at 100 bps, while Invesco and Research Affiliates both put the small cap advantage in the 300 bps area. Bank of America estimates the gap at 400 bps.
Think so?
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Post by mnfish on Jan 3, 2023 17:44:58 GMT
I have read similar analysis and have my eye on SMDV (down 8% - 1yr) and DGRS (down 15% - 1yr) which are small cap divvy growth ETFs.
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Post by fred495 on Jan 3, 2023 17:49:59 GMT
If you are a conservative investor, you may want to check out David Snowball's comment in the same MFO article quoted by chang regarding Palm Valley Capital (PVCMX):
It's an "absolute-value small-cap fund that is managed by Eric Cinnamond and Jayme Wiggins. Nominally the fund is four years old, which is wildly misleading. Mr. Cinnamond and, most recently, Mr. Wiggins have successfully pursued this strategy in four distinct mutual funds for a quarter century. The core distinction is this: the managers only buy stocks that are trading at a truly substantial discount to their fair value. If there are no appropriately priced opportunities, they invest the portfolio in cash and cash-like securities. That makes them incredibly frustrating to own when markets are soaring and they’re steadily unloading overpriced portfolio holdings in favor of cash. Indeed, Mr. Cinnamond liquidated one fund because he felt it unfair to charge investors for equity investments when only cash made sense.
The new fund is a five-star Great Owl that returned 3.2% in 2022, while its average peer lost 9.8%. That’s especially striking because the portfolio is still only 19% investing in stocks, mostly small- to micro-cap value stocks."
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Post by roi2020 on Jan 3, 2023 18:07:17 GMT
I've read the MFO and M* articles along with other articles which state that small-caps may outperform large caps in the coming years. I don't know if that will occur but I do believe in reversion to the mean (for most asset classes). No portfolio changes will be made based on this information. I've owned a dedicated small-cap fund (VTMSX) since 2012.
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Post by Chahta on Jan 3, 2023 19:43:13 GMT
"Think so?"
David Snowball is a pretty smart guy, I think. I like to read his monthly perspective. SC has underperformed for quite some time, so much I excluded it from my equity which is mainly index funds (SCHX and SCHD). Normally indexing would be total market. I like the idea of adding some SC and have been thinking about it for a year. Thanks to mnfish for suggesting SMDV and DGRS. I will investigate them and PVCMX. They all would fit managed, value and SC criteria.
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Deleted
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Post by Deleted on Jan 3, 2023 20:27:17 GMT
I've read the MFO and M* articles along with other articles which state that small-caps may outperform large caps in the coming years. I don't know if that will occur but I do believe in reversion to the mean (for most asset classes). No portfolio changes will be made based on this information. I've owned a dedicated small-cap fund (VTMSX) since 2012. I use VBR domestically and VSS internationally for small caps. My overall allocation is pretty small though, so I will be adding - only 3% of equities. What is your allocation? I have seen suggestions it be up to 20%. With mid cap I am at 16%, so 19% for both.
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Post by roi2020 on Jan 3, 2023 20:48:47 GMT
I've read the MFO and M* articles along with other articles which state that small-caps may outperform large caps in the coming years. I don't know if that will occur but I do believe in reversion to the mean (for most asset classes). No portfolio changes will be made based on this information. I've owned a dedicated small-cap fund (VTMSX) since 2012. I use VBR domestically and VSS internationally for small caps. My overall allocation is pretty small though, so I will be adding - only 3% of equities. What is your allocation? I have seen suggestions it be up to 20%. With mid cap I am at 16%, so 19% for both. I executed Portfolio X-Ray the other day. VTMSX is my only small-cap fund and it comprises 7.87% of the portfolio. IVOO is my only mid-cap fund and it constitutes 7.10% of the portfolio. Portfolio X-Ray indicates an 18% small-cap and a 12% mid-cap equity allocation (11.91% / 7.94% of total portfolio respectively). These totals may not be 100% accurate since funds' year-end holdings were not yet available.
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mrc
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Post by mrc on Jan 4, 2023 20:01:26 GMT
I have been investing in Avantis's AVUS for the last couple of years for Small Value. Moved to it from VIOV. In 401k, I have invested in VSCIX.
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Post by win1177 on Jan 4, 2023 21:58:40 GMT
That's what MFO seems to think: www.mutualfundobserver.com/2023/01/the-investors-guide-to-2023-three-opportunities-to-move-toward/Scroll down to "SMALL CAP STOCKS" Morningstar’s Lauren Solberg noted in December 2022 that “For smaller-company stocks, price/earnings ratios—a widely used measure for determining the value of a stock relative to its earnings—have reached their lowest levels in two decades.” The difference in P/E ratios between small-cap and large-cap stocks – 12.6 versus 20.2 – is the greatest since 2002. (Small Cap Stocks are Really Cheap, Lauren Solberg, 12/2/2022) The almost permanently skeptical GMO allows that “small-cap stocks have become notably cheap,” and RBC’s Lori Calvasina says that at current levels, small-cap stocks are already priced at valuations that would account for “the worst that you’d expect to see in the middle of a recession.”
Virtually all of the major management firms anticipate a decade of small-cap outperformance though the magnitude of the projected differences is huge. At the low end, Callan anticipates US small to outperform US large by 20 basis points (bps); BNY Mellon gives small caps at 100 bps, while Invesco and Research Affiliates both put the small cap advantage in the 300 bps area. Bank of America estimates the gap at 400 bps.
Think so? I’ve been reading various articles that suggest small caps may be a good place to be. I’m looking at increasing exposure to mid and small cap, especially MV and SV. I have dedicated vanguard funds in those two areas- VIMAX, VSIAX. May add to both this year, especially if markets pull back more. Win
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Post by saratoga on Jan 5, 2023 1:20:56 GMT
I have been investing in Avantis's AVUS for the last couple of years for Small Value. Moved to it from VIOV. In 401k, I have invested in VSCIX. AVUV? AVUS seems good also.
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Post by Chahta on Jan 5, 2023 1:48:36 GMT
I have been investing in Avantis's AVUS for the last couple of years for Small Value. Moved to it from VIOV. In 401k, I have invested in VSCIX. M* calls AVUS as LC blend.
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mrc
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Post by mrc on Jan 5, 2023 4:46:47 GMT
Sorry, that was a typo. I meant to write AVUV - Avantis US Small Cap Value ETF
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Post by oldskeet on Jan 7, 2023 11:46:32 GMT
Hi guys. For me, the smids currently make up about a third of my equity allocation found in the growth area of my portfolio. Generally, I keep at least a 20 percent exposure to them as part of my normal allocation. Thus, I have trimmed my large cap sleeve and raised my small/midcap sleeve to benefit from it's anticipated better performance. In addition my global growth sleeve is about a third of my growth allocation as well. Wishing All ... Good Investing. OS
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Post by steadyeddy on Jan 9, 2023 14:21:43 GMT
I tend to agree that Smids offer opportunity... but I want to wait till we turn the corner on this bear.
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Post by oldskeet on Jan 10, 2023 9:17:30 GMT
Hi steadyeddy , FWIW. I have reconfigured my equity allocation within my growth area and not increased it's weighing in my overall equity allocation. I am still with my portfolio's baseline asset allocation of 20 percent cash, 40 percent income and 40 percent equity. Within equity I am about two thirds growth and income and one third growth.
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Post by chang on Jan 10, 2023 13:25:20 GMT
A few years ago I owned BCSSX when it was very hot, and one of my luckier blunders was selling out in 2021 when I decided that I didn’t need SC in a retirement portfolio. I remember that ARTSX was pretty hot as well. Funny, I just checked those funds and they now have pretty poor 1-3-5 year records. I guess that just goes to show, that volatility is par for the course.
Edit: hot now is OAKEX 🔥
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Post by FD1000 on Jan 10, 2023 15:19:14 GMT
I tend to agree that Smids offer opportunity... but I want to wait till we turn the corner on this bear. The bear was on 10/2023, since then VBR was up 10+%. Can you explain how will you know when we turn the corner? And when it's going to be clear, don't you think you will miss the best opportunities already? Attachments:
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Post by johntaylor on Jan 27, 2023 16:03:08 GMT
History suggests small caps outperform coming out of recessions, and perhaps more recently on the value side
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Post by marpro on Jan 27, 2023 16:40:38 GMT
I tend to agree that Smids offer opportunity... but I want to wait till we turn the corner on this bear. The bear was on 10/2023, since then VBR was up 10+%. Can you explain how will you know when we turn the corner? And when it's going to be clear, don't you think you will miss the best opportunities already? FD: Is it 10/2022 or 10/2023?
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Post by Deleted on Jan 27, 2023 18:10:03 GMT
The bear was on 10/2023, since then VBR was up 10+%. Can you explain how will you know when we turn the corner? And when it's going to be clear, don't you think you will miss the best opportunities already? FD: Is it 10/2022 or 10/2023? He probably meant that the bear was 'over' on 10/2022.
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Post by Chahta on Jan 27, 2023 18:10:22 GMT
I tend to agree that Smids offer opportunity... but I want to wait till we turn the corner on this bear. I’ve never been much for trading. However I did bail on some bonds and managed equity growth funds in 2020. I redeployed managed equity late last year at an advantaged priced. I only kept my core LC + value throughout. I never had any SC since they have not added much for several years, in my indexing world. But I added SC value a few weeks ago. The bottom line is I’m not smart enough to know when things turn around. I’m all in now. I did not like being out of the market.
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Post by Deleted on Jan 27, 2023 18:29:16 GMT
The bear market supposedly began on 1/3/22, and the average bear lasts 10 months, which leads to a possible end in 10/2022.
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Post by uncleharley on Jan 27, 2023 20:08:19 GMT
The bear market supposedly began on 1/3/22, and the average bear lasts 10 months, which leads to a possible end in 10/2022. Interesting thought. The S&P 500 bottomed in mid Oct.
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Post by steadyeddy on Jan 27, 2023 21:53:05 GMT
The bear market supposedly began on 1/3/22, and the average bear lasts 10 months, which leads to a possible end in 10/2022. I honestly hope that you are right. But I personally do not believe this bear market is over yet. Reasoning is simple: inflation is very sticky and personal disposable income dropping really fast.
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Post by Karen on Jan 28, 2023 12:57:11 GMT
The bear market supposedly began on 1/3/22, and the average bear lasts 10 months, which leads to a possible end in 10/2022. Interesting thought. The S&P 500 bottomed in mid Oct. Yeah, I guess that would be an interesting thought (to some) IF that was the correct current bear market start date and the correct length of the average bear market. www.fool.com/investing/2022/10/12/how-long-sp-500-bear-market-last-history-says/?#:~:text=Since%201928%2C%20the%20S%26P%20500?awc=12195_1674910116_f9861c5d5c5ca309e70042ab340121be&utm_source=aw&utm_campaign=891997But didn't the current bear market actually start on June 13, 2022? "The S&P 500 began its descent in early January, but it didn't officially enter a bear market until June 13, 2022 -- or 121 days ago, as of this writing. If this bear market follows a similar path to those in the past (which is a big if), it could potentially be a few more months before the market bottoms out." And isn't the average bear market 388 days? "The average length of a bear market is 388 days." "Excluding the longest and shortest bear markets, the average length is around 330 days -- or just under one year."
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Post by yogibearbull on Jan 28, 2023 13:36:24 GMT
Beware that inclusive/comprehensive SC indexes (Russell, CRSP) have lots of garbage - almost 35-40% of their companies don't make any money. Stick with better SC indexes (S&P) or active SC funds. SC tend to be domestic, so they aren't affected much by the foreign markets.
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Post by steadyeddy on Jan 28, 2023 13:41:20 GMT
The closest similarity of this bear market is to that of 2001-2003 bear market. Although, similarity doesn't mean history repeats.
The meme stock fever is back, tesla is back, bitcoin is raging -- all in a matter of few weeks. That is suspicious..
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Post by chang on Jan 28, 2023 13:48:59 GMT
Beware that inclusive/comprehensive SC indexes (Russell, CRSP) have lots of garbage - almost 35-40% of their companies don't make any money. Stick with better SC indexes (S&P) or active SC funds. SC tend to be domestic, so they aren't affected much by the foreign markets. So you would steer clear of Vanguard’s VBR? “Seeks to track the performance of the CRSP US Small Cap Value Index, which measures the investment return of small-capitalization value stocks.”
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Post by yogibearbull on Jan 28, 2023 14:08:41 GMT
Beware that inclusive/comprehensive SC indexes (Russell, CRSP) have lots of garbage - almost 35-40% of their companies don't make any money. Stick with better SC indexes (S&P) or active SC funds. SC tend to be domestic, so they aren't affected much by the foreign markets. So you would steer clear of Vanguard’s VBR? “Seeks to track the performance of the CRSP US Small Cap Value Index, which measures the investment return of small-capitalization value stocks.” I am more clear on R2000 - it's BAD. Not only is includes all of SCs but does preannounced rebalancing on a single day in June. I tried to find more on CRSP SC index, but couldn't find more except that it is "comprehensive". So, I think it also has lots of unprofitable SCs. I didn't find any earnings/profit requirement. CRSP has its origin at the U Chicago and its index construction is generally better. Vanguard nurtured CRSP when it got sick of MSCI (VG nurtured it too when it was part of MS, but it became too cocky after its spinoff as MSCI). S&P SC ETFs are IJR, SLY - those are certainly better. This issue doesn't bother some as they say the SC space is what it is and they would take good with bad. But IMO, why not use better alternatives when they exist.
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Post by Chahta on Jan 28, 2023 14:19:57 GMT
I selected DGRS as a SC value/dividend ETF.
VIOV certainly looks better than VBR, but pays 1% less than DGRS.
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