Today Moneyletter Editor Walter Frank recommends a small-cap focused mutual fund.
“William Blair Small Cap Growth (WBSNX)—With 44% of net assets in microcap stocks, and another 44% in small cap fare, this fund truly lands at the tiniest end of the small cap fund spectrum. That in itself courts more risk than the typical small-cap growth fund. While the managers note that this segment can offer great
reward potential because it is underfollowed by Wall Street, it is also more thinly traded, and the smallest companies often lack the resources to weather economic or financial downturns.
“The effect on fund performance is clear. In a nutshell, when the market is rewarding earnings growth, the fund does great, but when the focus is on value or defensive themes, performance suffers. Fund results were especially impacted by the market’s implosion in 2008 and recovery the following year. The fund recorded a historic loss of 46.9% in 2008, followed by a record-setting gain of 69.6% in 2009. Since then, it’s been famine or feast, with bottom-dwelling results in 2010 and 2011, and top decile returns in 2012 and thus far in 2013.
Strategy
“The management team of Karl Brewer and Michael Balkin emphasize the importance of in-depth fundamental research. Brewer told Ticker.com, ‘We believe it is important to know the businesses extremely well, and our goal is to know them better than most of the people who follow the companies. We spend a lot of time visiting companies, so we can talk to management teams and see their facilities. This helps us find companies that are not on Wall Street’s radar screen.’
“The goal is to find quality growth companies, ones that meet some, if not all, of the following: market leadership, unique products or services, strong marketing capability, value to customer, and rapid industry growth. ... The managers also consider valuation and have a contrarian tendency to buy stocks which have been punished despite a promising outlook.”
Walter Frank, Moneyletter, www.moneyletter.com, 800-890-9670, June 2013