2
6
5
8
1
4
3
7

Opus News & Insights

Review of U.S. Small Caps - December 2017
Wednesday, January 3, 2018

Key Points
  • Small caps continued their momentum from 2016, rallying 14.7% in 2017, hitting new highs along the way. Although ending the year on a sour note, as December posted a-0.4% return, the quarter finished positive, bolstered by President Trump signing into law a historical tax reform. The Russell 2000 Index (R2K) has closed at record highs over 30 different times this year.
  • U.S. small caps have risen over 13.7% since August 21st, when President Trump reignited the tax bill conversation, contributing to the majority of their year-to-datereturn of 14.7%. During this period, small caps outperformed U.S. large caps by 3%.Unfortunately, this recent outperformance by small was not able to overcome large'slead for the year, trailing by 7.2%. For the first time ever, the S&P 500 closed positive in every single month during a calendar year.
  • Constant themes for 2017 have been stretched valuations and historically low volatility. The R2K trades at 21.5x forward earnings, slightly above where it started the year at 20.5x. The Russell 2000 Value Index (R2KV) trades at 18.8x, above historical averages, while the Russell 2000 Growth Index (R2KG) trades at 23.5x. Furthermore,on 52 different occurrences this year, the VIX index closed below 10. To put this in perspective, the VIX index has only closed below this mark nine (9) other times since 1990.
  • Another theme in 2017 was Growth outperforming Value, which again, was the casein December. September remains the only month this year where Value materially beat Growth. Even with Health Care and biotechs lagging in December, Growth bested Value by 1.1% for the month as Financials and Utilities, both overweights in Value, led sector underperformance. Growth finishes the year outperforming Value by 14.4%. However, the win by Growth was not as big as its loss to Value in 2016.
  • During the month, with the U.S. 10-Yr Treasury moving higher on increased inflation expectations, REITs and Utilities struggled. Energy posted its first back-to-back months of positive returns in 2017, as OPEC oil output continued to fall, coupled with a Libyan pipeline blast and a suspected leak in the North Sea's largest pipeline, sending oil prices above $60. For the year, Energy was one of only two sectors in the R2KV to finish in negative territory. Even after a difficult Q4, Health Care finished the year up 30.8%, outperforming the second best performing sector, Producer Durables, by 12.4%.Surprisingly, the spread between the best and worst performing sectors, Health Care and Energy, at 47.7%, was on par with historical norms,which has historically seen an average annual spread of 55%.
  • Though better than expected, small caps trailed large cap earnings growth for the fifth consecutive quarter. With this, the 2017 growth rate for small caps has been estimated at 6.4% with sales growth of 6.7%. Estimated growth in 2018 sits close to 24.0% and 5.7%, respectively.
  • For the year, only 26.3% of small cap core managers outperformed their relative benchmarks, while Value and Growth managers fared better with 57.6% and 51.7% outperforming, respectively. Even in a difficult environment, as the VIX index set a record for the calmest year, Value and Growth managers were able to add value, something which only one other style box was able to do successfully during the year; large cap value.
DOWNLOAD FULL PDF



 
 

Blog Categories

  • Opus Insights
    • 09/04/2018 - Review of U.S. Small Caps - Au
    • 08/06/2018 - Review of U.S. Small Caps - Ju
    • 08/03/2018 - Small Cap Value Plus turns 5
    • 07/31/2018 - Factor-Based Investing - Missi
    • 07/31/2018 - How Much is Your Mutual Fund C
    • 07/26/2018 - The Big Short (Interest)
    • 07/04/2018 - Review of U.S. Small Caps - Ju
    • 06/05/2018 - Review of U.S. Small Caps - Ma
    • 05/24/2018 - Opus - Simply Active
    • 05/11/2018 - Review of U.S. Small Caps - Ap
    • 04/03/2018 - Review of U.S. Small Caps - Ma
    • 03/06/2018 - Review of Small Caps - Februar
    • 03/01/2018 - Capcom, Co. Ltd. Proving My Pa
    • 02/23/2018 - Opus Capital’s Small Cap Value
    • 02/05/2018 - Review of U.S. Small Caps - Ja
    • 01/24/2018 - Nat Stewart Featured on Seekin
    • 01/03/2018 - Review of U.S. Small Caps - De
    • 12/06/2017 - Review of U.S. Small Caps - No
    • 11/27/2017 - RCI Hospitality Holdings, Inc.
    • 11/07/2017 - Review of U.S. Small Caps - Oc
    • 10/25/2017 - KAR Auction Services - Wholesa
    • 10/06/2017 - Review of U.S. Small Caps - Se
    • 09/28/2017 - Westlake Chemical Partners - E
    • 09/21/2017 - Review of U.S. Small Caps - Au
    • 09/19/2017 - Four Weird Tweaks That Confuse
    • 09/13/2017 - Opus Capital Management's Micr
    • 09/08/2017 - Opus Capital’s Small Cap Value
    • 09/08/2017 - Opus Capital Management Named
    • 08/11/2017 - If I Did It: What Collectors U
    • 08/08/2017 - Review of U.S. Small Caps - Ju
    • 07/10/2017 - Review of U.S. Small Caps - Ju
    • 07/06/2017 - Dividend Payer vs. Non Payer R
    • 06/15/2017 - Review of U.S. Small Caps - Ma
    • 06/13/2017 - Active Investing Is Not Dead,
    • 05/23/2017 - Opus Capital’s Small Cap Value
    • 05/18/2017 - Opus Capital Recognized as Top
    • 05/09/2017 - Review of U.S. Small Caps - Ap
    • 05/05/2017 - A Distribution Growth Juggerna
    • 05/05/2017 - Mexican Airports? Surely You C
    • 05/05/2017 - Opus Capital Mgmt. Launches In
    • 04/19/2017 - Interview with Adam Eagleston
    • 04/12/2017 - MicroCap Value Strategy Using
    • 04/10/2017 - Review of U.S. Small Caps - Ma
    • 04/07/2017 - Dividend Payer vs. Non Payer R
    • 04/07/2017 - Monroe Capital Is Ripe For A V
    • 04/03/2017 - Squeal Like a Pig? Not With WH
    • 03/24/2017 - ​Invest Like Zuckerberg, Not t
    • 03/03/2017 - Review of U.S. Small Caps – Fe
    • 03/01/2017 - Opus Capital Recognized as Top
    • 02/13/2017 - Review of U.S. Small Caps - Ja
    • 01/26/2017 - U.S. Microcaps Outperform in 2
    • 01/13/2017 - Small Caps Go Crazy in 2016
    • 01/12/2017 - Small Cap Rally Continues, Boo
    • 01/12/2017 - The Night is Always Darkest Be
    • 01/06/2017 - Review of U.S. Small Caps – De
    • 12/06/2016 - Review of U.S. Small Cap Value
    • 12/06/2016 - Oil Appreciation Day
    • 11/30/2016 - Opus Names Debra Gordon as Dir
    • 11/23/2016 - Opus Capital Recognized as Top
    • 11/22/2016 - Opus Capital: A 20-Year Retro
    • 11/11/2016 - The “Basket of Deplorables” Ra
    • 11/09/2016 - 2016 Election - The Morning Af
    • 11/08/2016 - Presidential Election 2016
    • 11/06/2016 - WSJ - "Junk Stocks" Strut, but
    • 11/04/2016 - Review of US Small Caps - Octo
    • 10/14/2016 - Living in a Material World
    • 10/13/2016 - Profit Owed to Leverage
    • 10/11/2016 - Observations on Poor Energy Co
    • 10/11/2016 - Independent Thinking Garners a
    • 10/05/2016 - Review of U.S. Small Caps - Se
    • 09/27/2016 - Review of U.S. Small Caps – Au
    • 09/19/2016 - Income Needs Have Insurers Loo
    • 09/01/2016 - Low Vol and Dividends a Crowde
    • 08/31/2016 - All Animals Are Equal, but Som
    • 08/26/2016 - Black Hole
    • 08/15/2016 - Review of U.S. Small Caps
    • 08/05/2016 - Robert Half International - a
    • 07/29/2016 - BGCP: Severe Undervaluation P
    • 07/13/2016 - Can Utilities Keep Going at Ma
    • 07/08/2016 - Review of US Small Caps
    • 06/30/2016 - Interest-ing Decisions Ahead f
    • 06/27/2016 - Negative Reality Bites
    • 06/04/2016 - Mallrats
    • 05/19/2016 - The Big Short (Interest)
    • 05/19/2016 - Energy and Oil Price Volatilit
    • 08/27/2015 - CHINESE CHECKERS - Volatility
    • 06/10/2015 - ​Black Gold, Texas Tea
    • 03/19/2015 - Don't "Yada Yada" Foreign Stoc
    • 02/17/2015 - Wealth Management Guide 2015
    • 02/16/2015 - 'Tis Better to Give and to Rec
    • 02/12/2015 - Navigating the Social Security
         
MEET OUR TEAM

Len A. Haussler, CFA, CPA
  Len A. Haussler, CFA, CPA
Founder
and Portfolio Manager

View Bio
Nathan A. Bishop, CFA
  Nathan A. Bishop, CFA
Principal
and Portfolio Manager

View Bio
Alex Moore
  Alex Moore
Associate Wealth Advisor

View Bio
David W. Wagner III, CFA
  David W. Wagner III, CFA
Research Analyst


View Bio
B. Rapking - Operations Associate
  Brad J. Rapking
Equity Trader and Associate Research Analyst
View Bio
Kevin P. Whelan, CFA
  Kevin P. Whelan, CFA
Principal
and Portfolio Manager

View Bio
Joseph P. Condren, CFA
  Joseph P. Condren, CFA
Principal, COO and CCO

View Bio

  Jakki L. Haussler, Esq., CPA
Founder and CEO

View Bio
Nathan M. Bailey, CFA, CFP®
  Nathan M. Bailey, CFA, CFP®
Associate Portfolio Manager

View Bio
Adam T. Eagleston, CFA
  Adam T. Eagleston, CFA
Principal
and Portfolio Manager

View Bio
  CONTACT INFO

221 E. 4th Street, Suite 2700
Cincinnati, OH 45202
Office: (513) 621-6787
  CONNECT WITH US

        
         
Copyright © 2017. Opus Capital Management. All Rights Reserved