article 09-22-2016

Francis Gannon in Morningstar: "Is It Time to Get Small?"

The stealth bear market that spanned the June 23, 2015 small-cap peak through its year-to-date low on February 11, 2016 gave small-caps plenty of room to run, says Co-CIO Francis Gannon

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Morningstar's Bryan Borzykowski discusses the opportunities to be had in small-cap stocks in his new article, "Is It Time to Get Small?"

Bryan describes the current state of small-cap: "Even though the Russell 2000 has climbed about 30% since Feb. 11, small caps may still have room to run. There are plenty of opportunities and a lot of positives--mostly related to the still expanding U.S. economy--that make small-caps solid long-term investments."

Co-Chief Investment Officer Francis Gannon shared insights with Morningstar, making Royce's case for small-caps.

Regarding the shift in leadership to value, Francis said: "For many years small growth-oriented companies have received the bulk of small-cap investor attention. These are biotech, internet and other businesses that often didn't generate any earnings. As more people became worried about the overall economy late last year, access to capital dried up for many of these operations and stock prices tumbled."

He continued, "As the small-cap market rebounds, investors have started to turn their attention to more value-oriented small cap fare, those companies that do generate revenues and can survive for the longer-term. Similar to the large-cap space, some of the sectors that have seen the biggest gains over the last few months have been more defensive industries, such as consumer staples, healthcare, and real estate investment trusts."

Francis also commented on the potential benefits of owning small-cap value stocks: "There are great businesses out there that meet the merits of quality and value. It's these companies that will benefit from the power of compounding."

Read the article here.

Francis Gannon has 23 years of investment industry experience. He joined Royce in 2006.

Important Disclosure Information

The thoughts and opinions expressed in this piece are solely those of the person speaking and may differ from those of other Royce investment professionals, or the firm as a whole. There can be no assurance with regard to future market movements.

This material is not authorized for distribution unless preceded or accompanied by a current prospectus. Please read the prospectus carefully before investing or sending money. Smaller-cap stocks may involve considerably more risk than larger-cap stocks. (Please see "Primary Risks for Fund Investors" in the prospectus.)

Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell© is a trademark of Russell Investment Group. The Russell 2000 Index is an index of domestic small-cap stocks that measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index.

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