Small-Cap Funds with Dash, Not Trash
These steadier small-cap funds haven't missed a beat during the recent rally.
In general, risky stocks have enjoyed a much sharper rally than their stable-growth counterparts since the market's last bottom on March 9, 2009. Small-cap stocks in particular have enjoyed a big bounce. Even with the pullback in recent weeks, the average small-cap fund has gained 45% since the last bottom, putting it up 7% for the year to date ended June 29, 2009.
Whether or not the recent rally has been a "dash to trash," not all mild-mannered funds have been wallflowers. We zeroed in on some of these funds using the Premium Screener. First, we limited the screen to domestic small-cap funds that are open to new investments of $25,000 or less and which also sport below-average expense ratios. We also screened for funds that had lower debt/capital ratios than the Russell 2000 Index, a common small-cap benchmark, in 2008. This measure can help point to portfolios that had less exposure to debt-laden firms, and, therefore, these portfolios may have lagged those with riskier fare in recent months.
To stress-test the funds' performance, we required that the funds have top-third rankings next to peers for the trailing three-month period, which encompasses much of the recent rally, as well as for the year to date. Plus, we required minimum manager tenures of 10 years and top-third rankings for the trailing 10-year period. The screen turned up the following five funds as of June 29, 2009:
Karin Anderson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.