Small and Mid-Caps are close to all-time highs even as Large-Caps have marked time for the past decade.
Because big companies dominated the top performers lists back in 1999 – 2000 their share valuations grew to unsustainably overpriced levels. That’s why the stock prices of many fine companies that have posted significant advances in their fundamentals have seen little to no progress in their share prices since 2000.
Conversely, many of the overlooked small and mid-cap companies at the turn of the millennium were trading at less than typical multiples simply due to being the ‘out of favor’ group. Their stocks, as a group, have been superb performers as noted on this 10-year chart from the Jan. 23, 2011 Wall Street Journal.
While the chart only shows the Mid-Caps versus the S&P 500, the body of the WSJ article noted that the S&P Small-Cap 600 was recently within 3% of its all-time peak set in July 2007.
From 2000 – 2010:
|
Index |
Cum. Performance (including Div.) |
Outperformance |
|
S & P 500 |
14.1% |
N/A |
|
S& P 400 (mid-caps) |
72.0% |
410.6% |
|
S & P 600 (small-caps) |
77.2% |
447.5% |
For 2010 only:
|
Index |
Cum. Performance (including Div.) |
Outperformance |
|
S & P 500 |
15.% |
N/A |
|
S& P 400 (mid-caps) |
26% |
73.3% |
|
S & P 600 (small-caps) |
27% |
80% |
Credit Suisse Group notes that the relative outperformance has now pushed the average P/Es of the smaller companies to 17x versus the large caps average of 14x. That may set the stage for a reversal of trend going forward.
Dr. Paul Price www.BeatingBuffett.com www.OptionsProfits.com
January 23, 2011
Have you visited the Boglehead’s Forum?
There’s a lot of information on midcaps, and a famous thread by one of the senior moderators, Mel Lindauer, entitled ‘Mel’s unloved midcaps’. I can’t find the original thread, but here are a few similar veins:
http://www.bogleheads.org/forum/viewtopic.php?t=2571
http://www.bogleheads.org/forum/viewtopic.php?t=1997
http://socialize.morningstar.com/NewSocialize/ViewPost.aspx?apptype=0&PostID=2396251
And some returns:
LCB = US Large Blend:
=====================
S&P 500: Standard & Poors 1970-1991
Vanguards 500 Index Fund 1992-2006
MCB = US Mid Blend:
===================
CRSP Decile 3-5 1970-1978
Russell Mid Cap Index 1979-1998
Vanguards Mid Cap Index Fund 1999-2006
SCB = US Small Blend:
=====================
Ibbotson 1970-1978
Russell 2000 Index 1979-1991
Vanguards Small Cap Index Fund 1992-2006
MICRO = US MicroCap Blend:
==========================
CRSP Decile 10 1970-1997
BRSIX Bridgeway Ultra Small Market 1998-2006
10K Growth and other stats…
500 Index
506,373.64
StDev
16.80
CAGR
11.19
Mid Cap Blend
1,068,710.94
StDev
18.17
CAGR
13.46
Small Cap Blend
745,455.37
StDev
21.73
CAGR
12.36
MicroCaps
856,505.63
StDev
26.57
CAGR
12.78