This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Small-Cap Value Funds With Big-Time Performance

Our findings in the small-cap value pack include some of the category's greatest hits.

Starting at the top, we've got the (FLPSX) fund where Joel Tillinghast has called the shots since the fund's launch at the end of 1989. In that time he's topped his average competitor in 10 of the past 12 calendar years. Tillinghast was our pick for fund manager of the year for 2001, when the fund gained 27% and beat its average peer by more than nine percentage points. The fund's near- and long-term track record is even more impressive in light of its biggest drawback: its size.

Most small-cap funds close to new investors before they hit the $2 billion asset mark because a larger asset base makes it tough to shift around nimbly in the less liquid small-cap market. Tillinghast's fund had a whopping $12.4 billion in assets at the start of this month, compared with $350 million for its average peer.

To compensate for the fund's stunning size, Tillinghast spreads the fund's cash among more than 800 small-cap stocks in which he sees a modest valuation and solid earnings growth. That breadth hasn't sapped the fund's returns so far, but it could down the road, so you might want to look at some of the others on our list.

Small-Cap Value All-Stars
Small is often beautiful when it comes to value funds
Fund Five-Year Annualized Return One-Year Return
(FLPSX) 14.4% 23.2%
(RYOTX) 14.2 16.6
(PENNX) 13.4 12.9
(FRMCX) 12.1 33.7
(FPPTX) 11.3 16.7
Average Peer 10.4 11.9
S&P 500 9.2 -16.1
Source: Morningstar, returns through Jan. 23.

Royce Funds, a renowned small-cap value specialist bought by Legg Mason in October, has two no-load funds on our list: (RYOTX) and the (PENNX) fund.

Whitney George took the Micro-Cap fund's reins from Chuck Royce at the start of last year, but he had co-managed the fund since 1993. He maintains the firm's long-held strategy of focusing on stocks of small companies in which they see healthy balance sheets, a reasonable valuation and the potential for solid earnings growth.

Royce and George together run the Pennsylvania Mutual fund, essentially blending picks from the Micro Cap and the (RYPRX) fund, which focuses on stocks of small-cap companies. Both the Micro-Cap and Pennsylvania Mutual funds top their average peer over the past one, three, five and 10 years. Some might be rattled by the firm's recent sale, but Royce and George signed contracts to continue managing the funds for at least five more years.

Bob Rodriguez, manager of the broker-sold (FPPTX) fund since its 1984 start, actually won Morningstar's manager of the year award last year for his work on a bond fund, (FPNIX). With this stock fund, he typically holds between 35 and 40 stocks of companies in which he sees a healthy balance sheet, solid cash flow and a reasonable valuation. He's shown dexterity in picking stocks as well as bonds, beating both his average peer and the S&P 500 over the past one, three, five and 10 years.

The broker-sold (FRMCX) fund's presence on this list underscores why a fund isn't necessarily good for you just because it clears our hurdles. Bruce Baughman, the fund's lead manager since its 1995 launch, typically buys stock of companies with little debt that are trading at a discount to their book value, or what a company would be worth if its real assets were liquidated. The fund's strict style has led to feast or famine results. Over the past six calendar years, for instance, it has beaten its average peer only three times.

That said, the fund tops more than 70% of its peers over the past five years, mainly due to a boffo 2001 when investors favored the smallest and cheapest stocks they could find. The fund gained 42% last year, beating its average peer by 24 percentage points. Those expecting similar gains any time soon are probably in for a nasty surprise, though.

Another small-cap value fund not on our list that's worth considering is the (TAVFX) fund, which Marty Whitman has run since its 1990 launch. Whitman trolls for battered stocks of companies with bleak near-term outlooks in which he sees a rosier long-term story. He usually only buys shares of companies he thinks are trading for half their intrinsic value.

While the fund's 15.7% 10-year annualized gain trounces its average peer and the S&P 500, Whitman tends to focus on financials and tech stocks, and that's kept him behind his peers over the past year. Also, value purists probably shouldn't bother with the fund because his picks have ranged from Japanese insurers to the debt of buckling Web site host Exodus Communications (EXDSQ). That said, his flair for delivering solid, tax-efficient returns over time is tough to knock.

Click on these links to check out the other funds we dug up:

  • Large-cap value funds
  • Mid-cap value funds
  • Check Out Our Best Services for Investors

    Action Alerts PLUS

    Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

    Product Features:
    • $2.5+ million portfolio
    • Large-cap and dividend focus
    • Intraday trade alerts from Cramer
    Quant Ratings

    Access the tool that DOMINATES the Russell 2000 and the S&P 500.

    Product Features:
    • Buy, hold, or sell recommendations for over 4,300 stocks
    • Unlimited research reports on your favorite stocks
    • A custom stock screener
    Stocks Under $10

    David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

    Product Features:
    • Model portfolio
    • Stocks trading below $10
    • Intraday trade alerts
    14-Days Free
    Only $9.95
    14-Days Free
    Dividend Stock Advisor

    David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

    Product Features:
    • Diversified model portfolio of dividend stocks
    • Updates with exact steps to take - BUY, HOLD, SELL
    Trifecta Stocks

    Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

    Product Features:
    • Model Portfolio
    • Intra Day Trade alerts
    • Access to Quant Ratings
    Real Money

    More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

    Product Features:
    • Access to Jim Cramer's daily blog
    • Intraday commentary and news
    • Real-time trading forums
    Only $49.95
    14-Days Free
    14-Days Free
    AAPL $110.76 0.34%
    FB $94.01 2.11%
    GOOG $641.28 2.30%
    TSLA $246.00 -0.63%
    YHOO $30.84 0.42%


    Chart of I:DJI
    DOW 16,776.43 +304.06 1.85%
    S&P 500 1,987.05 +35.69 1.83%
    NASDAQ 4,781.2640 +73.4890 1.56%

    Free Reports

    Top Rated Stocks Top Rated Funds Top Rated ETFs