Is micro-cap (< 1 billion market cap) value enough different from small-cap value to justify an allocation specifically to it (presumably taken from the small-cap value allocation)? If yes, individual portfolio of micro-cap value stocks or fund / ETF? If individual portfolio, tips? If fund / ETF, suggestions? (When I searched the forum using the term micro-cap, I found much good discussion but not much is recent.)
Background:
The American Association of Individual Investors (AAII) has maintained a portfolio of micro-cap value stocks since 1993. The portfolio buys stocks when they are in the smallest decile market cap and lowest decile price / book. Currently, this is market cap < 300 million and price book < 0.9. AAII refers to these as Shadow Stocks. The portfolio has achieved 13.6% annualized return from inception through 5/31/2024 vs 10.3% for the Vanguard 500 index fund (VINEX) or 9.8% for Vanguard Small Cap Index fund (NAESX) but has been very volatile. (Return info from AAII website.) AAII argues that micro-cap value stocks may represent an opportunity for individual investors since they are too small for most institutional investors to take meaningful positions.
I have invested in Bridgeway Ultra Small Market fund (BRSIX) since 2003 because it (is one of very few that) invests in similarly small stocks. Current average market cap is 190.98 million. The fund "aims to approximate the returns of Cap-Based Portfolio 10 Index published by the University of Chicago's Center for Research in Security Prices (CRSP) over long time periods". Although it doesn't explicitly select low price to book stocks, many micro-cap stocks have low price to book ratios and the current price to book for this portfolio is 1.21. (The fund holds almost 600 stocks. Portfolio statistics per Morningstar as of 5/31/2024.)
For comparison, Vanguard Small Cap Value index (VSIAX) has a current average market cap of 6.14 billion and price to book of 1.64.
The annualized return from 12/31/1998 through 12/31/2023 for BRSIX was 9.90%, for VSAIX was 9.42%, and for the AAII Shadow Stock portfolio was 12.89%.
AVUV and DFSV are small-cap value ETFs (with much shorter history). Average market-caps / price to book are 2.51 billion / 1.19 and 3.03 billion / 1.07 respectively.
Recently, I have moved some of my BRSIX position into a personal portfolio similar to the AAII Shadow Stock portfolio but, so far, my returns since fall 2022 have been lower than if I had remained invested in BRSIX.
Background:
The American Association of Individual Investors (AAII) has maintained a portfolio of micro-cap value stocks since 1993. The portfolio buys stocks when they are in the smallest decile market cap and lowest decile price / book. Currently, this is market cap < 300 million and price book < 0.9. AAII refers to these as Shadow Stocks. The portfolio has achieved 13.6% annualized return from inception through 5/31/2024 vs 10.3% for the Vanguard 500 index fund (VINEX) or 9.8% for Vanguard Small Cap Index fund (NAESX) but has been very volatile. (Return info from AAII website.) AAII argues that micro-cap value stocks may represent an opportunity for individual investors since they are too small for most institutional investors to take meaningful positions.
I have invested in Bridgeway Ultra Small Market fund (BRSIX) since 2003 because it (is one of very few that) invests in similarly small stocks. Current average market cap is 190.98 million. The fund "aims to approximate the returns of Cap-Based Portfolio 10 Index published by the University of Chicago's Center for Research in Security Prices (CRSP) over long time periods". Although it doesn't explicitly select low price to book stocks, many micro-cap stocks have low price to book ratios and the current price to book for this portfolio is 1.21. (The fund holds almost 600 stocks. Portfolio statistics per Morningstar as of 5/31/2024.)
For comparison, Vanguard Small Cap Value index (VSIAX) has a current average market cap of 6.14 billion and price to book of 1.64.
The annualized return from 12/31/1998 through 12/31/2023 for BRSIX was 9.90%, for VSAIX was 9.42%, and for the AAII Shadow Stock portfolio was 12.89%.
AVUV and DFSV are small-cap value ETFs (with much shorter history). Average market-caps / price to book are 2.51 billion / 1.19 and 3.03 billion / 1.07 respectively.
Recently, I have moved some of my BRSIX position into a personal portfolio similar to the AAII Shadow Stock portfolio but, so far, my returns since fall 2022 have been lower than if I had remained invested in BRSIX.
Statistics: Posted by TomBH — Mon Jun 24, 2024 5:09 pm — Replies 1 — Views 270