1
6
2
7
8
5
4
3

Opus News & Insights

Review of U.S. Small Caps - May 2018
Tuesday, June 5, 2018

Key Points
  • So much for sell in May and go away, as U.S. small caps had their best monthly showing since September 2017. In May, small caps returned 6.1%,outperforming U.S. large caps, which returned 2.4%. This marks three consecutive months in which small has outperformed large, something that has not happened since the middle of 2016. Furthermore, since market lows in early February, small has outperformed large by 6.5%, thus leading year to-date.
  • Growth beat Value again, boosted by outperformance in Health Care and Technology, which both tend to be overweights in the Russell 2000 Growth Index (R2KG). Growth also benefited from the fastest growers outperforming.The R2KG returned 6.3%, besting the Russell 2000 Value Index (R2KV) by 0.5%. Furthermore, the R2KV saw headwinds as it is overweight bond proxies,Utilities and REITs, which underperformed.
  • Due to strong performance, the R2K's forward P/E rose to 19.5x, up from 17.9x in March. Relative to large caps, small caps trade at a 12% premium, well above their 4% historical average. The R2KV trades at a forward P/E of 16.5x and the R2KG trades at 21.7x.
  • The low quality rally this month was driven by non-earners, specifically in Health Care and Energy, which both tend to be littered with companies that do not turn a profit. The lowest market cap was boosted by ETF inflows totaling $4.8B, which is the largest monthly inflow since November 2016. Companies with the lowest leverage and fastest growth outperformed, which has been the case all year long.
  • With continuing strength from oil, Energy had another strong bounce in May,and is now up 22.5% over the last two months. As mentioned above, bond proxies underperformed, even though interest rates slightly declined. For the year, Consumer Staples is the only sector to have negative performance. Health Care and Energy, which are both littered with non-earners, have significantly outperformed relative to other sectors.
  • With earnings season nearing completion, sales and earnings growth has been quite strong, though, anecdotally, it feels that the market has not responded to the surprises. Small caps, on average, have grown sales by 9.9% and earnings by 23.4% relative to the first quarter last year. Both of these growth figures have outperformed their larger cap brethren.
  • For the month, only 18% of small cap Core managers outperformed their relative benchmarks, while Growth managers fared better, with 55% outperforming. Value managers struggled, as non-earners and fastest growers outperformed, leading to only 22% of managers beating their relative benchmark. Year-to-date, Core and Value managers have struggled, but Growth continues to outperform as the fastest growers have been one of the best performing factors this year.
DOWNLOAD PDF



 
 

Blog Categories

  • Opus Insights
    • 08/06/2018 - Review of U.S. Small Caps - Ju
    • 08/03/2018 - Small Cap Value Plus turns 5
    • 07/31/2018 - Factor-Based Investing - Missi
    • 07/31/2018 - How Much is Your Mutual Fund C
    • 07/26/2018 - The Big Short (Interest)
    • 07/04/2018 - Review of U.S. Small Caps - Ju
    • 06/05/2018 - Review of U.S. Small Caps - Ma
    • 05/24/2018 - Opus - Simply Active
    • 05/11/2018 - Review of U.S. Small Caps - Ap
    • 04/03/2018 - Review of U.S. Small Caps - Ma
    • 03/06/2018 - Review of Small Caps - Februar
    • 03/01/2018 - Capcom, Co. Ltd. Proving My Pa
    • 02/23/2018 - Opus Capital’s Small Cap Value
    • 02/05/2018 - Review of U.S. Small Caps - Ja
    • 01/24/2018 - Nat Stewart Featured on Seekin
    • 01/03/2018 - Review of U.S. Small Caps - De
    • 12/06/2017 - Review of U.S. Small Caps - No
    • 11/27/2017 - RCI Hospitality Holdings, Inc.
    • 11/07/2017 - Review of U.S. Small Caps - Oc
    • 10/25/2017 - KAR Auction Services - Wholesa
    • 10/06/2017 - Review of U.S. Small Caps - Se
    • 09/28/2017 - Westlake Chemical Partners - E
    • 09/21/2017 - Review of U.S. Small Caps - Au
    • 09/19/2017 - Four Weird Tweaks That Confuse
    • 09/13/2017 - Opus Capital Management's Micr
    • 09/08/2017 - Opus Capital’s Small Cap Value
    • 09/08/2017 - Opus Capital Management Named
    • 08/11/2017 - If I Did It: What Collectors U
    • 08/08/2017 - Review of U.S. Small Caps - Ju
    • 07/10/2017 - Review of U.S. Small Caps - Ju
    • 07/06/2017 - Dividend Payer vs. Non Payer R
    • 06/15/2017 - Review of U.S. Small Caps - Ma
    • 06/13/2017 - Active Investing Is Not Dead,
    • 05/23/2017 - Opus Capital’s Small Cap Value
    • 05/18/2017 - Opus Capital Recognized as Top
    • 05/09/2017 - Review of U.S. Small Caps - Ap
    • 05/05/2017 - A Distribution Growth Juggerna
    • 05/05/2017 - Mexican Airports? Surely You C
    • 05/05/2017 - Opus Capital Mgmt. Launches In
    • 04/19/2017 - Interview with Adam Eagleston
    • 04/12/2017 - MicroCap Value Strategy Using
    • 04/10/2017 - Review of U.S. Small Caps - Ma
    • 04/07/2017 - Dividend Payer vs. Non Payer R
    • 04/07/2017 - Monroe Capital Is Ripe For A V
    • 04/03/2017 - Squeal Like a Pig? Not With WH
    • 03/24/2017 - ​Invest Like Zuckerberg, Not t
    • 03/03/2017 - Review of U.S. Small Caps – Fe
    • 03/01/2017 - Opus Capital Recognized as Top
    • 02/13/2017 - Review of U.S. Small Caps - Ja
    • 01/26/2017 - U.S. Microcaps Outperform in 2
    • 01/13/2017 - Small Caps Go Crazy in 2016
    • 01/12/2017 - Small Cap Rally Continues, Boo
    • 01/12/2017 - The Night is Always Darkest Be
    • 01/06/2017 - Review of U.S. Small Caps – De
    • 12/06/2016 - Review of U.S. Small Cap Value
    • 12/06/2016 - Oil Appreciation Day
    • 11/30/2016 - Opus Names Debra Gordon as Dir
    • 11/23/2016 - Opus Capital Recognized as Top
    • 11/22/2016 - Opus Capital: A 20-Year Retro
    • 11/11/2016 - The “Basket of Deplorables” Ra
    • 11/09/2016 - 2016 Election - The Morning Af
    • 11/08/2016 - Presidential Election 2016
    • 11/06/2016 - WSJ - "Junk Stocks" Strut, but
    • 11/04/2016 - Review of US Small Caps - Octo
    • 10/14/2016 - Living in a Material World
    • 10/13/2016 - Profit Owed to Leverage
    • 10/11/2016 - Observations on Poor Energy Co
    • 10/11/2016 - Independent Thinking Garners a
    • 10/05/2016 - Review of U.S. Small Caps - Se
    • 09/27/2016 - Review of U.S. Small Caps – Au
    • 09/19/2016 - Income Needs Have Insurers Loo
    • 09/01/2016 - Low Vol and Dividends a Crowde
    • 08/31/2016 - All Animals Are Equal, but Som
    • 08/26/2016 - Black Hole
    • 08/15/2016 - Review of U.S. Small Caps
    • 08/05/2016 - Robert Half International - a
    • 07/29/2016 - BGCP: Severe Undervaluation P
    • 07/13/2016 - Can Utilities Keep Going at Ma
    • 07/08/2016 - Review of US Small Caps
    • 06/30/2016 - Interest-ing Decisions Ahead f
    • 06/27/2016 - Negative Reality Bites
    • 06/04/2016 - Mallrats
    • 05/19/2016 - The Big Short (Interest)
    • 05/19/2016 - Energy and Oil Price Volatilit
    • 08/27/2015 - CHINESE CHECKERS - Volatility
    • 06/10/2015 - ​Black Gold, Texas Tea
    • 03/19/2015 - Don't "Yada Yada" Foreign Stoc
    • 02/17/2015 - Wealth Management Guide 2015
    • 02/16/2015 - 'Tis Better to Give and to Rec
    • 02/12/2015 - Navigating the Social Security
         
MEET OUR TEAM

Kevin P. Whelan, CFA
  Kevin P. Whelan, CFA
Principal
and Portfolio Manager

View Bio
Joseph P. Condren, CFA
  Joseph P. Condren, CFA
Principal, COO and CCO

View Bio
David W. Wagner III, CFA
  David W. Wagner III, CFA
Research Analyst


View Bio
B. Rapking - Operations Associate
  Brad J. Rapking
Equity Trader and Associate Research Analyst
View Bio
Nathan M. Bailey, CFA, CFP®
  Nathan M. Bailey, CFA, CFP®
Associate Portfolio Manager

View Bio
Adam T. Eagleston, CFA
  Adam T. Eagleston, CFA
Principal
and Portfolio Manager

View Bio
Nathan A. Bishop, CFA
  Nathan A. Bishop, CFA
Principal
and Portfolio Manager

View Bio
Alex Moore
  Alex Moore
Associate Wealth Advisor

View Bio

  Jakki L. Haussler, Esq., CPA
Founder and CEO

View Bio
Len A. Haussler, CFA, CPA
  Len A. Haussler, CFA, CPA
Founder
and Portfolio Manager

View Bio
  CONTACT INFO

221 E. 4th Street, Suite 2700
Cincinnati, OH 45202
Office: (513) 621-6787
  CONNECT WITH US

        
         
Copyright © 2017. Opus Capital Management. All Rights Reserved