Fundametrics® Small Cap Equity Q3 2018 Performance Summary and Observations


Performance Chart

  • The Fundametrics® Small Cap Value strategy returned 1.71% for the quarter, vs. the Russell 2000 Value’s 1.60%.
  • Despite our slight edge, this remains a challenging market for Value investors. Factor leadership remains extremely narrow, with Momentum and Forecasted Long Term Growth the overwhelmingly dominant drivers of returns, as they have been all year.
  • In keeping with this factor profile, what we’ll call “Hope” companies--otherwise known as our “Sell” rated stocks (bottom 30%) in our Alpha Composite--continue to excel, beating our “Buy” rated stocks by 424 bps. These stocks tend to be the most expensive by far, often have negative current earnings, and generally carry the loftiest expectations.  Our models find that these stocks carry the worst future return profiles over time.  
  • Notably, valuation spreads now show extreme inversion.  Over the last year, the highest valuation companies as measured by Price to Earnings and Price to Book are beating the most attractive valuations by 17% and 14% respectively—a big gap.  Our strategy performs best when valuation performance is at least neutral.
  • On the positive side, we see directionally favorable trends in Value (particularly in spreads) in four of the past five weeks, although it is too early to call a trend. We last saw similar signs earlier this spring. We believe there are very attractive opportunities today for patient investors willing to run against the grain.

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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