Fundametrics® Small Cap Equity 1Q19 Performance Summary and Observations

Algorithm

  • CornerCap’s Fundametrics® Small Cap Equity Composite returned 13.16%, outperforming the Russell 2000 Value Index by 123 basis points.
  • Progress for the Value style is proving to be slow: the initial roar in January faded to whimper in March. Still, the setup for Value looks favorable as small cap valuations are historically attractive, both in absolute and relative to large-cap equities. In corroboration, key indicators in our broader models show extreme opportunities in Value.
  • Growth leadership is proving hard to dethrone. “Highest Growth Forecast” returned to the top this quarter.  Companies with this profile are the least profitable, and half carry a “sell” rating in our Alpha Composite.  Their persistence in outperformance has reached extreme levels in our view, and we consider these stocks to be vulnerable.
  • The mainstays of our research process generated incremental discrimination: our Alpha Composite Buy-rated stocks beat our Equal Weighted Universe by 122 bps. Our Financial Warnings Overlay “Safe”-rated stocks outperformed by 130 bps vs. our “Avoid/Fail”-rated stocks.
  • In a reversal to 2018, High Beta or “cyclical” stocks beat Low Beta by 441bps during the quarter, a little less than a quarter of Low Beta’s outperformance last year. 

For a full copy of the report, please contact Derek Tubbs, VP of Institutional Development and Associate Portfolio Manager, at dtubbs@cornercap.com or 404-968-2619.

Past performance is no guarantee of future results, and all investments are subject to risk of loss.

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