The top five holdings of this small-cap fund are American Airlines Group, Inc. (AAL, 2.57% of assets); Lithia Motors, Inc. (LAD, 2.05%); Horizon Pharma plc (HZNP, 1.83%); Cooper Tire & Rubber Company Co (CTB, 1.77%); KapStone Paper and Packaging Co (KS, 1.76%). Our second recommendation is a sell on an underperforming stock.
Hodges Small Cap Retail (HDPSX)
from BI Research
Hodges Small Cap Fund (HDPSX) remains a 5-star rated small-cap fund focused on growth and value opportunities with a strong record. As of 4/30 the fund has gained an average 12.5% per year since its inception in December 2007 vs. 8.4% for the Russell 2000. Note that this includes the great bear market.
Over the past 5 years Hodges has averaged annualized gains of 17.8% vs. the Russell 2000’s 12.7%, so about 5 percentage points better each year on average. Year to date, the Russell is up 3.3% and HDPSX is up a tad more at 3.8%, while the S&P 500 is up just 3.1%. While small caps underperformed big caps in 2014, they have outperformed in 2015 so far. And over the longer term small-caps outperform mid-caps and mid-caps outperform large-caps. (This is exactly why I focus on the small caps.)
Given the strong dollar, holding a portfolio of smaller companies with far less international exposure is a big plus. Hodges has a portfolio that’s right in our wheelhouse, while adding some diversification and exposure to new sectors. Accordingly the fund remains a Buy.
Tom Bishop, BI Research, www.biresearch.com, May 20, 2015