Magazine article Black Enterprise

Bringing Up the Rear

Magazine article Black Enterprise

Bringing Up the Rear

Article excerpt

Small-cap stocks still lagging behind the rest of the market

Each year for nearly the last nine, small-capitalization market gurus have been predicting that finally large-cap growth stocks will lose steam and small-cap stocks will become the new market leaders. And for nearly every year, those prognosticators have been proven wrong.

It looks like 1999 will be yet another disappointment for small-cap aficionados, as a robust economy with little inflation fuels the fast-rising earnings of large-caps, making them hard to beat--especially in recent months. The market averages tell the story. The Russell 2000 index, which tracks small-cap stocks, is down 1.15% as of September 24. The Dow Jones industrial average's 11.96% return so far this year beats it cleanly, as does the Standard & Poor's 500 index's 3.92% gain.

"There's been a complete thrashing of the overall market, if you will, particularly of small-caps," says Dawn Alston Paige, a portfolio manager with Loomis Sayles & Co. in Bloomfield Hills, Michigan.

Whether or not it's time for small-caps to rise "all depends on their earnings outlook relative to large-cap stocks," says Alston Paige, who runs the Loomis Sayles Midcap Value fund (800-633-3330). And she expects the earnings of large-cap stocks to keep growing.

But all is not gloomy for small caps--that is, if investors are willing to take a long-term view, says Alston Paige. Now is the time to buy small-cap stocks with solid franchises, unique businesses and good long-term growth prospects, she says. …

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