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Small- and Mid-Cap Value Stocks for Risk-Averse Investors

By Mark Basham After a strong performance last year, the small-cap and mid-cap value sectors remain attractive for 2001. Last year, the S&P/Barra Mid-Cap and Small-Cap value indexes trounced their Growth and Large-Cap counterparts, with gains of 27.8% and and 20.9%, respectively.

Even after those nice gains, these segments remain attractive for risk-averse investors. The price-earnings ratios for the respective indexes, based on estimated 2001 earnings per share, are 15 and 14 -- around a one-third relative discount to that of the S&P 500. These sectors represent a safe haven as the "e" in the p-e is likely to continue to contract overall for equities.

Among our top picks in these groups (each ranked *****, buy): OSCA Inc. (OSCA), Pre-Paid Legal (PPD), Seitel (SEI), and Watson Wyatt (WW). Basham is Standard & Poor's emerging growth and IPO analyst

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