Michael Brush: A small-cap fund guru explains why you need to invest in small companies: they’re the stock market’s undiscovered nuggets.

by | Mar 19, 2023 | Stock Market

Small-cap stocks are a great place to put your money right now because they’re cheap. How cheap? Bank of America analysts pointed out recently that this group trades 10% below their long-term average p/e ratio. For guidance on how to invest in the small-caps and names to consider, I recently talked with a mutual-fund manager with more than 50 years of experience investing in small, lesser-known companies. That would be Chuck Royce, of Royce Investment Partners. 

When Royce founded his investment shop specializing in small-caps in 1972, there were just 13 small-cap mutual funds. Now investors can choose from more than 500 small-cap funds plus more than 100 small-cap exchange traded funds (ETFs).  Not only does Royce bring the wisdom that comes from more than five decades of investing, he has a strong record that supports his approach. His Royce Pennsylvania Mutual Fund
beats its Morningstar U.S. small cap index by 1.5 and two percentage points annualized over the past three- and five years. Here are three key takeaways from Royce on the stock market overall, the tactics that help him outperform, and some of his favorite small-cap names to consider.  1. Small caps will shine: Royce agrees with Bank of America strategist that small-caps are cheap. But he uses a slight …

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