- CornerCap’s Fundametrics® Small Cap Equity Composite returned 4.52%, outperforming the Russell 2000 Value Index by 315 basis points.
- Our research process hit on all cylinders in 2Q19, continuing strong YTD performance. Our Alpha Composite Buy-rated stocks beat our Equal Weighted Universe by 122 bps and our Sell-rated stocks by 267 bps. Our Financial Warnings Risk Overlay had an excellent quarter and was the biggest contributor to our success, with “Safe”-rated stocks outperforming our “Avoid/Fail”-rated stocks by 960 bps.
- As in 2018, Growth and Momentum remain among the top performing factors, but we see signs that factor leadership is broadening. Importantly, valuation spreads are mixed but continue to improve, which helps our performance, and factors tied to aggressive forecasts faded substantially. Stocks with the most aggressive profiles in earnings and price targets are the least profitable currently; half carry a Sell rating in our models.
- The primary headwind for us relative to the benchmark in 2Q19 was a significant “cap effect,” with the biggest 30% of our universe beating the bottom 30% by 319 bps.
- The setup for Value continues to look 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.
For a full copy of the report, please contact Derek Tubbs, VP of Institutional Development and Associate Portfolio Manager, at firstname.lastname@example.org 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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Fundametrics® Research Process
The Fundametrics® research process is our proprietary computer-based research system, which screens our universe of stocks and decile ranks them according to specific valuation criteria.