top of page
Search

Small Cap versus Large Cap

  • Writer: Scott Pederson
    Scott Pederson
  • Sep 12, 2019
  • 1 min read

Great charts from Bespoke Investment Group showing how the ratio of outperformance by large cap represented by the S&P 500 over small cap represented by the Russell 2000 got to the top of a 15 year range. However, it shows recently how the ratio has been decreasing as small caps have started to outperform. Even with the small cap rally to large cap recently, the ratio of large cap outperforming small cap is still above the historical average. According to the JP Morgan Guide to the Market, small cap value based on its Current P/E is trading at 93% of its 20 year average Current P/E. Based on this valuation metric, it is the most undervalued area of the U.S. stock market. One thing to keep in mind with the small cap space is the quality of the small cap companies that you own because there are a lot of “zombie” companies in this space. A “zombie” company is one which is not even able to cover their debt-servicing costs with current earnings. According to Leuthold Weeden Capital Management, the proportion of small-cap U.S. firms without earnings stood at 32% at the end of May, matching the highest level since the Global Financial Crisis. So make sure you are well diversified in the small cap space and know what you own . #largecap #smallcap #zombiecompanies #earnings #valuations



 
 
 

Comments


Harmony Wealth Management LLC

No client or potential client should assume that any information presented or made available on or through this website should be construed as personalized financial planning or investment advice. Personalized financial planning and investment advice can only be rendered after engagement of the firm for services, execution of the required documentation, and receipt of required disclosures. Please contact the firm for further information.

Check the background of this investment professional on FINRA's BrokerCheck.

  • LinkedIn - Black Circle

PAST PERFORMANCE MAY NOT BE INDICATIVE OF FUTURE RESULTS. ALL INVESTING INVOLVES RISK, INCLUDING THE POTENTIAL FOR LOSS OF PRINCIPAL. THERE IS NO GUARANTEE THAT ANY INVESTMENT PLAN OR STRATEGY WILL BE SUCCESSFUL.

Harmony Wealth Management LLC is an Indiana and Illinois Registered Investment Adviser

bottom of page