Small-cap stock run could herald broader recovery
Saturday July 5, 4:17 am ET
By Joe Bel Bruno, AP Business Writer
Small-caps historically seen leading market out of recession; could signal rebound in starting
NEW YORK (AP) -- Even as Wall Street skids lower almost by the day, and the major indexes have touched the levels of a bear market, some analysts are actually finding some signs in the performance of small-company stocks that might be pointing to the early stages of a much broader recovery.
Small-cap stocks are now doing better than the overall market -- and that has some analysts hopeful. These stocks typically get knocked lower during tough economic times as investors look to safer investments, but historically are the first to rise when the economy rebounds.
In the year following the end of each of the past 10 recessions, small stocks rose an average of 28 percent compared to 19 percent for large stocks, according to T. Rowe Price. And, the Russell 2000 index of smaller companies has performed significantly better than larger-company indexes so far this year.
While the Dow Jones industrials are down about 15 percent for the first half of the year, the Russell 2000 has fallen 10 percent. And, since the lows of mid-March, the Russell has risen almost 7 percent compared to the less than 1 percent gain by the broader Standard & Poor's 500 index.
"The classic thinking is that if you're going to bet on a recovery, small-caps are going to lead the charge," said John Thornton, co-portfolio manager of Houston-based Stephens Investment Management Group. "And when all you hear about is oil prices, interest rates and credit exposure, in the small-cap world you can find unique companies that can grow despite a bad economy."
An official recession hasn't been declared because it takes several quarters for economists to analyze all the data. And, in many cases the U.S. was already on its way out of a recession by the time economists got around to calling one.
The general feeling on Wall Street is that the U.S. is already in a recession, and one that likely began at the end of last year. So, that means the rise in small-cap stocks might indicate the recovery is already under way.
The upside right now of small-cap indexes like the Russell 2000 is that they're largely shielded from credit market turmoil. Instead of big global financial brands like Citigroup Inc. or Merrill Lynch & Co., the small-cap indexes contain regional banks with little or no exposure to mortgage-backed securities and other risky investments.
"Investors should be less market cap sensitive and more value sensitive," she said. "We love stocks of all sizes, and if I see good value I'm allowed to go out and buy it."
While small-caps are known for being volatile, they are also the asset class that has the best potential for fast growth. The fact that small-caps are often in niche industries helps them to withstand even a bad economy.
There is evidence that rising inflation might even be an advantage for small companies over their larger counterparts. Smaller companies typically have leaner staffs and more cost controls, so that helps them better manage high commodities prices.
In addition, the products they make or services they delivered are often specialized enough where they can defray some of the higher costs to customers.
"We might not know if the rise in small-caps portends a larger rebound," Caughey said. "But, there's no reason not to move into these stocks as a whole, especially if you're looking for growth."
I really dont care who is paid or not,,,, what Im concerned with is this $25PPS to get to the NUAN(SSFT) party cruise,,,,, Ive wait patiently for that mark,so close I could almost touch it and then BLAM $16 again,,,, Im thinking this is Carnival's way of saying take your VR and SHOVE IT!
You haven't even come close to being around here long enough to comment on me: http://search.messages.yahoo.com/search?.mbintl=finance&q=smallcaps491&action=Search&r=Huiz75WdCYfD_KCA2Dc-&within=author&within=tm
I will share a secret with you that might help your morale and eliminate your need to project your anger onto others.
You can stop being angry that you are an investing wimp by actually stopping being a wimp.
Thank you for stating my position better then I have been able. This message board has been, and continues to be, an interesting study in irrational crowd behavior.
They are going to tar and feather you now for saying anything nice about me.
For the record: I encourage readers to mark recent board behavior in their mind. Once the market and/or NUAN's situation turns positive and I turn to support same, suddenly the folks here that have bashed me will begin cheering. If my position gets too positive, they will call me a pumper.
I appreciate your comments but it really is lost on these folks that are worried more about emotions than truth. When someone tells them how it is, rather than learn and make money, they whine about the tone of the messenger's voice.
I don't believe anybody here seriously believes that Air is a "paid basher". Many/most/all are frustrated with the current share price which, in my opinion, has nothing to do with Nuance fundamentals. Some people handle their frustration better than others.
Air is one of the few that has kept things real, and maybe the only one that backs up his post with a link we all can go to and form our own opinions.
We all should know that Air feels very strongly about Nuances's upside potential. He has stated clearly that even Nuance can be effected by investor's fears of a tough economy, whether those fears are justified or not.
Nuance Communications Climbs To Highest Level In Over Two Weeks
7/16/2008 12:30 PM ET
(RTTNews) - Nuance Communications, Inc. (NUAN: News, Chart, Quote ) rose to a range within the first 30 minutes of trading on Wednesday. In the last 15 minutes, the stock has resumed its climb and is currently at $16.37 up $1.35 from Tuesday's close.
With the advance, the stock has broken over a recent trading range and to its highest level since late June.
by RTT Staff Writer
Nuance Communications reports Inducement Grants under NASDAQ Marketplace Rule - Quick Facts
Nuance Communications (NUAN) reveals Inducement Grants under NASDAQ Marketplace Rule 4350
Nuance Communications Breaks Resistance
Nuance Communications (NUAN) Names Gary Clayton Chief Creative Officer
eBay Q2 profit up 22% on global strength, Sets Q3 target, Boosts FY08 Target - Update
Yum! Brands Q2 earnings rise, top estimate; boosts FY08 earnings outlook
Stocks End Wednesday's Session Sharply Higher - U.S. Commentary
The Fed and Treasury step back in. Good timing. Should make for an interresting week. Shows they're prepared to pull out all the stops to aid what's been ailing our economy - and to help get things back on the right track. I'm starting to feel better about Paulson/Bernanke, as they're prepared to back up their words with action. Obviously not out of the woods yet, but I'm liking more our team, the resolve, and the prospects for a greater show of confidence and turn towards recovery.
'Treasury, Fed to prop up Fannie Mae, Freddie Mac if needed'