Higher returns with less volatility.
A rare article on this subject in the Asian Wall Street Journal, (on page 23 in the Money & Investing section, March 26 "07) on "Global Small Caps Draw Fans".
Here is a two page story on how this sector outperforms large-cap stocks, in Asia, Europe and the US. There is a 7 year graph there showing how small cap stocks have overall returned about 170% since year 2000, vs. about 60% for large cap stocks. "Small cap stocks have outpeformed in each of the past six years", since year 2000. And this by almost a factor of 3 to 1!
The article further says: "And the small cap stocks gains came with fewer ups and downs then stocks in developing countries". Hence further supporting my long held firm belief, so often stated here, that small cap stocks often produce higher returns with far less volatility; surely is the holy grail to superior investing!
Despite this far better performance small caps stocks are pricier (high p/e ratios) then large cap stocks in most countries. Unlike in Thailand, in Europe for example small cap stocks are now 19% more expensive then the large EU companies, according to Citigroup. On the Thai SET exchange the opposite is so.
Ing is quoted as saying that over the last 12 years foreign small cap stocks have been less volatile then other overseas investments in emerging market stocks.
"If you want to diversify with relatively low volatility, foreign small caps stocks are the way to go." so is quoted in this article Mr. Brian Gendreau, an investment strategist at Ing, in New York.
Congratulations to this Newspaper to at last tell us what many of us long know already. A stronger performing sector which I have focussed here on for over a decade -on and so few know these here as we do.
Paul A. Renaud.