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Mutual Fund Commentary

Investors looking to mop up handsome gains over a short run often invest in small cap funds. Though riskier in character than other fund categories, these funds have the ability to deliver appreciably higher returns due to two primary reasons. Firstly, they generate high volumes of sales in a booming market, leading to a rise in prices. In addition, research has shown that smaller firms reinvest their profits back into their business. This reassures shareholders of better performance over the long term.

Below we will share with you 5 top rated small-cap mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all small-cap funds, investors can click here to see the complete list of funds.

Mutual Fund

Zacks Rank

Total Return YTD

Walthausen Small Cap Value

#1 Strong Buy

23.5%

Schneider Small Cap Value

#1 Strong Buy

22.8%

Oppenheimer Discovery A

#1 Strong Buy

21.4%

Legg Mason ClearBridge Small Cap Growth A

#1 Strong Buy

19.2%

Longleaf Partners Small-Cap

#1 Strong Buy

18.8%

 
Walthausen Small Cap Value (WSCVX - MF report) seeks capital growth over the long term. The fund focuses on purchasing common stocks of small cap companies which have the ability to grow invested capital. The firms invested in must have market capitalizations of $2 billion or lower. This small-cap mutual fund returned 41.5% over the last one year period.

The fund manager is John B. Walthausen and he has managed this small-cap mutual fund since 2008.

Schneider Small Cap Value (SCMVX - MF report) invests a large share of its assets small cap firms. The fund focuses on acquiring common stocks which are attractively priced relative to their underlying value. A maximum of 20% of its assets may be invested in foreign securities, including ADRs. This small-cap mutual fund returned 47.17% over the last one year period.

The small-cap mutual fund has an expense ratio of 1.15% compared to a category average of 1.39%.

Oppenheimer Discovery A (OPOCX - MF report) seeks capital growth. The fund invests in common stocks of growth oriented domestic companies. The fund concentrates on investing in small cap companies, firms with a market cap lower than $3 billion at the time of purchase. This small-cap mutual fund returned 31.87% over the last one year period.

The fund manager is Ronald J. Zibelli, Jr. and he has managed this small-cap mutual fund since 2006.

Legg Mason ClearBridge Small Cap Growth A (SASMX - MF report) invests the majority of its net assets in small cap companies and related instruments. The fund concentrates on investing in small domestic companies which focus on delivering growth. This small-cap mutual fund returned 38.96% over the last one year period.

As of September 2012, this small-cap mutual fund held 91issues, with 2.81% of its total assets invested in SolarWinds, Inc.

Longleaf Partners Small-Cap (LLSCX - MF report) seeks long-term capital appreciation by investing in small-cap companies. Equity securities, including related convertible securities constitute the fund’s major investments. A maximum of 30% of its assets may be used to purchase foreign securities, including those issued from emerging markets. This small-cap mutual fund returned 29.61% over the last one year period.

The small-cap mutual fund has an expense ratio of 0.92% compared to a category average of 1.27%.

To view the Zacks Rank and past performance of all small-cap mutual funds, investors can click here to see the complete list of funds.

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds.

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