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Mutual Fund Commentary

Mutual funds which invest in small-cap companies are the natural choice of investors with an appreciably higher appetite for risk and the willingness to take short term positions. Smaller companies reinvest a significant share of their earnings back into their business on a regular basis. This reassures stockholders of improved performance and higher profits. When markets are booming, small cap mutual funds see high levels of demand which leads to significant increases in their prices. Investors seeking greater diversification would do well by adding small cap flavor to their portfolios.

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.

Conestoga Small Cap (CCASX - MF report) invests heavily in small cap companies. The fund focuses on acquiring equity securities, including ADRs, convertible securities and preferred stocks. Under normal circumstances, not more than 20% of its assets may be utilized to purchase foreign securities. This small-cap mutual fund has a three year annualized return of 14.75%.

William C. Martindale, Jr. is the fund manager and he has managed this small-cap mutual fund since 2002.

Buffalo Small Cap (BUFSX - MF report) seeks capital growth over the long term. The fund invests the majority of its assets in common, preferred stocks and related convertible securities of domestic small-cap companies. A maximum of 20% of its assets may be invested in ADRS. This small-cap mutual fund has a three year annualized return of 10.81%.

The small-cap mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.00% compared to a category average of 1.46%.

Wells Fargo Intrinsic Small Cap Value (SCOVX - MF report) invests a large share of its assets in equity securities of small-cap companies. These firms must have market capitalizations within the range of the Russell 2500 Index. This small-cap mutual fund has a three year annualized return of 11.73%.

As of November 2012, this small-cap mutual fund held 66 issues, with 2.93% of its total assets invested in KAR Auction Services, Inc.

Needham Small Cap Growth (NESGX - MF report) seeks long term capital growth. The fund invests the majority of its assets in domestic equity securities of companies traded on a domestic security exchanges. The fund focuses on acquiring stocks which are attractively priced relative to their underlying value. The small-cap mutual fund has a three year annualized return of 8.45%.

Chris J. Retzler is the fund manager and he has managed this small-cap mutual fund since 2008.

Lord Abbett Small-Cap Value A (LRSCX - MF report) invests heavily in small-cap companies. The fund purchases common and convertible preferred stocks, convertible securities and other related instruments. The companies it invests must have market capitalizations within the range of the Russell 2000 index. This small-cap mutual fund has a three year annualized return of 12.13%.

The small-cap mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.23% compared to a category average of 1.34%.

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.

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