Academic research has shown that high-quality small capitalization stocks have consistently outperformed lower-quality, large cap stocks over multiple full market cycles. In fact, a 3-factor backtest shows that these stocks outperformed by 8.2% a year over the last 20 years.*
More to choose from: 70% of publicly traded stocks are defined as small cap, meaning there is a greater selection from which to choose when putting together a portfolio, vs a smaller number of mid/large cap stocks.
Fewer analysts can mean hidden value: There is a big difference between analyst coverage of larger stocks, which can have an average of 20 analysts covering each company. The average small cap (less than $3B) has 3 analysts, which means there may be a greater gap between the price of these stocks and their actual value.
Our active management process narrows our focus to a smaller number of stocks by screening for quality and value, so we can build a diverse and robust portfolio.