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Mutual Fund Commentary

When investors have the willingness to take short term positions and the ability to bear a certain degree of risk, small-cap funds could be the correct choice. These funds generate significant demand driven sales during a market upswing, which lead to an increase in their prices. Smaller firms also look to continuously reinvest their profits back into their business. This reassures shareholders of superior performance and higher profit potential from such companies. Small Cap funds therefore make excellent additions to a well-diversified portfolio.

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.

Nuveen NWQ Small Cap Value A (NSCAX - MF report) seeks capital growth over the long term. The majority of its assets are invested in companies whose market capitalizations are similar to those included in the Russell 2000 Value Index or the Standard & Poor’s SmallCap 600 Index. A maximum of 35% of its assets may be invested in foreign equity shares. This small-cap mutual fund has a three year annualized return of 16.04%.

Phyllis G Thomas is the fund manager and he has managed this small-cap mutual fund since 2004.

Queens Road Small Cap Value (QRSVX - MF report) invests a large share of its assets in equity securities of domestic small cap companies. It focuses on companies whose market capitalizations are below $2 billion at the time of its investment. The small-cap mutual fund is non-diversified and has a three year annualized return of 8.04%.

As of September 2012, this small-cap mutual fund held 56 issues, with 3.09% of its total assets invested in Darling International, Inc.

Legg Mason ClearBridge Small Cap Growth A (SASMX - MF report) invests heavily in small cap companies and relevant instruments. The fund focuses on investing in growth-oriented small domestic companies. This small-cap mutual fund has a three year annualized return of 16.82%.

The small-cap mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.36% compared to a category average of 1.47%.

Lord Abbett Small Cap Value A (LRSCX - MF report) seeks capital growth over the long term. The fund invests the majority of its assets in those domestic small companies whose market capitalizations are within the range of the Russell 2000 index. This small-cap mutual fund has a three year annualized return of 11.22%.

Gerard S.E. Heffernan, Jr. is the fund manager and he has managed this small-cap mutual fund since 2009.

Lord Abbett Small Cap Blend A invests a large share of its assets in small companies. The fund purchases securities of both domestic and foreign companies. It invests in emerging market companies and may also invest in American Depositary Receipts (ADRs). This small-cap mutual fund has a three year annualized return of 8.28%.

The small-cap mutual fund has a minimum initial investment of $1,500 and an expense ratio of 1.36% compared to a category average of 1.47%.

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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