Philosophy & Process
Micro-cap — One of the Last Inefficient Market Cap ClassesLess researched companies can offer excess returns.1 This philosophy, strongly linked to The Small Firm Effect2 — the finding that smaller companies have historically provided stronger absolute and risk-adjusted returns than other asset classes — guide our investment philosophy. No Analyst Coverage: Analysts that cover Small/Micro-cap stocks are typically from boutique research/brokerage firms.
|Number of Stocks||98||79|
|Zero Analyst Coverage||12||23|
|One Analyst Coverage||19||19|
|Average Number of Analysts||3.04||2.04|
All data as of 9/30/19, unless otherwise noted.
Micro-caps are measured by the Russell Microcap Index, Small-caps by the Russell 2000 Index, Mid-caps by the Russell Midcap Index, and Large-caps by the S&P 500 Index.
Russell Microcap Index is a capitalization weighted index of 2,000 small-cap and micro-cap stocks that captures the smallest 1,000 companies in the Russell 2000, plus 1,000 smaller U.S.-based listed stocks. Russell 2000 Index is an index that measures the performance of approximately 2,000 small-cap companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks. Russell Midcap Index measures performance of the 800 smallest companies (31% of total capitalization) in the Russell 1000 Index. S&P 500 Index is an index of 500 stocks seen as a leading indicator of U.S. equities and a reflection of the performance of the large cap universe. One cannot invest directly in an index.
1 “The Relationship Between Market Value and Return of Common Stocks.” Rolf Banz, Journal of Financial Economics, November, 1981.
2 “The Neglected and Small Firm Effects.” Avner Arbel & Paul Strebel, The Financial Review, vol. 18, issue 4, 1982.
3 Source: Capital IQ as of 9/30/19.
4 Typically 0–1 at initial purchase.