Gloom and Doom? Not for the Smaller Fry
By Mark Basham
Small- and mid-cap value stocks are outperforming the broader market thus far in 2001, and remain fundamentally attractive.
Though all sectors and style indexes were down in February, the S&P MidCap 400/Barra index suffered the least, with a 3.3% decline. The S&P SmallCap 600/Barra Value index was the second best performer, down 4.2%. Mid-cap and Small-cap Value are the only style sectors holding slim gains year-to-date, up 1.0% and 3.4%, respectively.
And relative to the broader market, these sectors remain fundamentally attractive, trading at 13.8 and 13.1 times their 2001 earnings estimates, versus 17.3 for the S&P 500/Barra Value Index. Overall, the MidCap 400 and SmallCap 600 are trading at relative discounts of 19% and 31% relative to the "500" based on 2001 estimates.
Basham is Emerging Growth/IPO analyst for Standard & Poor's