First Quarter Performance + Small Caps
I hate trying to explain performance numbers, but let’s give it the old college try.
Top 25 Model results were mixed. First quarter results were below the S&P equal-weight and the value indexes, but much better than my competitors.
Maybe I was saved by my slight tilt toward larger cap?
Teck, Halliburton, Tyson, Corteva, Alexandria, Sysco, and Restaurant Brands are more mid-cap than small-cap, and could border on large-cap depending on where you draw the line. That is 28% of the portfolio. I also avoided market caps below $2 billion, and that has helped.
Add that to my gold and pawnshop hedge, and you get most of my out-performance.
Thor, Chart, Brunswick, and RXO were bad under-performers, and Halliburton and Matador were well below average.
Perhaps my ideas have better than average balance sheets? That could explain some of the out-performance.
Why did my small-cap competitors do so poorly?
If I wanted to come with a really complex explanation, I might say that tax-loss sellers waited until the new year to sell their losers. The current period “feels” like most September-October periods were stocks that have been going down, just keep going down. That is not scientific, but it might be true.
A more straightforward explanation is there is absolutely no liquidity in small cap stocks, and if you have to sell there are no buyers.
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First quarter total return:
Top 25 Model = - 1.50%
S&P 500 = - 4.27%
Equal-Weight S&P (RSP) = - 0.67%
Mid Cap Value Index = + 1.39%
But my fellow value managers had a hard time in the first three months:
First Eagle Small Cap = -9.57 (category - 7.26%)
Diamond Hill Small/Mid Cap (DHMIX) = - 5.00%
Victory Sycamore Small Cap (VSOIX) = - 7.50%
T Rowe Price Mid-cap Value (TRMCX) = - 3.01% (category -1.70)
Consumer Discretionary (XLY) = - 11.74%
Industrials (XLI) = - 0.22%
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Ok you idiot, don’t just sit there do something. It must be time to buy a small cap.
My top ideas under $2 billion in market cap:
Krispy Kreme
Wabash
Foot Locker
Stepan
Steve Madden
Oxford
First Watch
Portillo’s
Rogers
Atlas Energy
Azenta
Magnite
Astrana
SunOpta
Douglas Dynamics
MGP Ingredients
Ultra Clean
Tronox
Neogen
Titan Int.
Hillenbrand
Peabody
MillerKnoll
Sphere
US Physical Therapy
B&G Foods
Calumet
Camping World
Gorman Rupp
Lindblad Exp.
Great Lakes Dredge