Weekly Digest – Small can return big

 In Weekly Digest

As small cap stocks have continued to lag their large cap peers, with the Russell 2000 US small cap index posting returns of 7.8% per annum over the past 3 years compared to 14.5% for the US main board, S&P 500, so the difference in valuations (as measured by price to book) has grown to its widest level in the past 20 years. Could this provide an attractive point to gain exposure to small cap stocks? Whilst valuations have limited predictive power in the short term, in our opinion they are a very reliable indicator of longer-term returns.

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