Fundametrics® Small Cap Equity Q2 2018 Performance Summary and Observations


Performance Chart

  • The Fundametrics® Small Cap Value strategy returned 6.55% for the quarter, trailing the Russell 2000 Value’s 8.30%--certainly a disappointing quarter, but consistent with what we would expect in this environment driven by narrow factor leadership and what we call “riskier growth” in the value index.
  • Ironically, although the Value Index beat the Growth Index in 2Q, valuation actually DID NOT MATTER. The spreads on our composite of value factors were negative. Dynamics in the Russell 2000 Value were driven instead by non-value factors: including (on the positive side) high forecasted growth and short-covering, and (on the negative side) fears of a trade war (industrials).
  • The mainstays of our research process were out of favor: our Alpha Composite Sell-rated stocks beat our Buy-rated stocks by a significant 400 bps. Our Financial Warnings Overlay also detracted, as aggressive balance sheet growth (a long-term negative, in our view) was rewarded in this market.
  • Style leadership continues to be very narrow, with Stock Price Momentum and Long-Term Earnings forecasts doing substantially better than most of our 140+ factors. Importantly, stocks ranking highest in these factors are also generally THE MOST EXPENSIVE. This market usually presents a challenge for Value and Garp managers to distinguish themselves.

For the full report, please contact Derek Tubbs, VP of Institutional Development and Associate Portfolio Manager, at 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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