Saturday Screen: Micro-Cap Funds You Can Still Get Into
Micro-cap stocks combine big risks, big potential returns and, sometimes, attractive prices. Break out your magnifying glass, because today we're looking at funds that feast on them.
No, micro-caps aren't tiny hats. They're small and often young companies with market capitalizations of $325 million or less, at least according to Morningstar's definition. Over the long term, studies show they've posted higher returns than large-cap stocks, but their fledgling nature makes them much more risky. Micro-caps look a bit less risky than they used to, though. The market's obsession with large-cap growth stocks, and tech stocks in particular, in recent years, has left many small- and micro-cap stocks with attractive valuations. That has some managers licking their chops. "It's a fertile hunting ground right now for under-followed and undervalued companies that are growing quickly," says Rainerio Reyes, co-manager of the $117.6 million (RSMGX)RS MicroCap Growth fund, which has returned 44.9% over the past year. "It's a good time to look at these because micro-caps, particularly on the value side, aren't trendy right now," says Russ Kinnel, director of fund analysis at Morningstar. And if you're going to jump into the micro-cap pool, a fund is probably the best route, he says, since many of these companies are obscure and thinly traded. So this week's Saturday Screen sifts for domestic funds that invest in micro-cap stocks. To make our list, funds had to beat the average small-cap fund over the past three years, have a manager who's held the reins for at least that long and have a median market cap of $325 million or less. They also had to be open to new investors -- no small concern, since micro-cap funds tend to close quickly. A big asset base can make it tough to buy thinly traded stocks without moving their prices and paring returns. Here's our top 10:| Funds That Think Small Top-performing micro-cap funds. | |||
| Fund | YTD Return | Median Market Cap. ($mil.) | Avg. P/E Ratio |
| (BMCFX)Bjurman Micro-Cap Growth | 12.7% | $244 | 38.3 |
| (WMICX)Wasatch Micro Cap | 6.7 | 260 | 26.9 |
| (RYOTX)Royce Micro-Cap | 4.7 | 176 | 20 |
| (PRSVX)T. Rowe Price Small-Cap Value | 3 | 270 | 18 |
| (TCSVX)Clover Small Cap Value | 1 | 247 | 25.6 |
| (HRVIX)Heartland Value Plus | -0.1 | 156 | 18.4 |
| (DFSVX)DFA U.S. 6-10 Value | -1.2 | 303 | 21.8 |
| (DFSCX)DFA U.S. 9-10 Small Company | -4.2 | 160 | 23.8 |
| (RHJSX)UAM Rice Hall James Small Cap | -7 | 229 | 25.5 |
| (HRTVX)Heartland Value | -9.3 | 205 | 15.9 |
| Small-Cap Funds Avg. | -0.3 | 1,300 | 34 |
| S&P 500 | -1.8 | 89,725 | 37.1 |
| Source: Morningstar. Performance figures through May 30. Portfolio data through most recent public portfolio and may have changed. | |||
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