Small-Cap Investing: How to Play The Emerging Small-Cap Rally
Small-Cap Investing: How to Play The Emerging Small-Cap Rally
by Louis Basenese, Advisory Panelist
Associate Investment Director, The Oxford Club
Wednesday, January 7, 2009: Issue #911
Forget the grim news that Alcoa (NYSE: AA) is slashing costs and cutting 13% of its workforce. We all know times are tough. But the market’s a forward-looking beast. And right now, it’s doing exactly what I predicted on November 19. It’s favoring small caps over large caps.
In December the little guys put up big numbers - a 5.8% gain versus a mere 1.1% uptick for the large guys, based on the Russell 2000 and S&P 500 indexes.
Before I get to my favorite ways to screen and play this emerging small-cap rally, let me first address my critics.
My last column failed to convince some of you. Others thought I simply skimped on the proof. Or more specifically, that I failed to tell you why NOW is the right time to buy small caps.
As they put it, “We all know small caps lead the markets out of a recession. But what makes you so convinced we’re on the way out?”
As my college physics professor liked to say before each lecture, “Prepare to be enlightened.”