Stock Smarts: Bet small; win big?
Big stocks have been big busts in 2001. The overall markets continue to drop. The year-to-date numbers are not pretty:
Dow down 5%
Nasdaq down 24%
S&P 500 down 12%
Maybe bigger isn’t better. The Merrill Lynch Micro Cap Index, which charts the performance of smaller stocks, is up 17% for the year. These stocks have a much smaller market cap than those on the major indexes, thus making for a very volatile and risky play.
So is small all that?
Jonathan Hoenig from Capitalist Pig Asset Management says yes, noting that the small caps are totally outperforming the large cap stocks, and that these stocks appear to be bullish going forward.
Jonas Max Ferris, founder of Maxfunds.com also likes the small caps as a long-term investment. He feels that the large cap stocks are overvalued, and that although there are big risks involved with the small caps, the possible rewards are great.
Rob Black from the GLB Group likes the small caps in the long run, but he suggests having a mix off all stocks (small, mid and large cap) to forma rounded portfolio.
Hilary Kramer of the Cisneros Group is not quite as enthusiastic about these stocks, saying “micro cap equals macro risky.” She feels that the small caps are stealth stocks that often times fly under the radar of many analysts. There is also very little research on these stocks, and any event, no matter how big or small, can move the stocks, making them open to speculation.
It is the policy of the Fox News Channel not to discuss specific stocks with a market cap of less than $500 million unless there is a specific news peg. But we asked our panel how they would play these stocks. Each panelist picked a fund that specialized in small cap stocks:
Jonas: Royce Micro Cap Fund (RYOTX)
Rob: Russell 2000 Index (IWM)
Hilary: Boston Partners Small Cap Value II Fund (BPSCX)
Jonathan: Dow Jones U.S. Small Value (DSV)
Mutual Fund Face-Off
Topic: The best fund manager. Dagen McDowell of SmartMoney and Jonas Max Ferris each picked their favorite fund manager, along with a specific fund run by their go-to-guy.
Manager: Bill Nygren (Oakmark Family of Funds)
Fund: Oakmark Fund (OAKMX)
Manager: John Calamos (Calamos Asset Management)
Fund: Calamos Growth Fund (CVGRX)
Television personality and actor Dick Cavett has a strong interest in the stock market, but his knowledge when it comes to stocks is not as commanding as his recent turn on Broadway in the stage adaptation of “The Rocky Horror Picture Show.”
He did say, however, that today’s kids are getting a jump on the game by learning the ins and outs of investing in school. So what would have helped Dick as a youngster learn about the markets?
We asked Jonas Max Ferris and Hilary Kramer their thoughts on kids and investing. Hilary says the best way to get kids involved is to get them a stake in the markets. Open up a small brokerage account ($250), and have the kids invest in some companies that they are familiar with:
Viacom (VIA) - owners of MTV, Comedy Central and Nickelodeon
Abercrombie & Fitch (ANF) - popular clothing line
McDonalds (MCD) - still the food of choice with the kids
Hilary says the point of opening a small account is really not to double or triple that initial $250, but to show the kid how the market works, and how money can either go up, or, as is the case many times, go down.
Jonas says to be very careful with stocks and kids; you don’t want to push a stock down a kid’s throat in order to have him or her learn. He suggests the Stein Row Young Investor Fund (SYRIX). This fund has a lot of literature for kids dealing with the stocks that make up the funds, plus a game on the fund’s website (www.steinrow.com) to help the kids follow the path of the fund.
Dagen and Jonathan wrapped up the show by answering some email question from
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