Back to top

Buy 4 Small-Cap Growth Funds as Indexes Hover Near Highs

Read MoreHide Full Article

After notching record highs, benchmarks did close in the red on Tuesday. But, it was mostly due to hawkish comments by some Fed officials. However, oil price hitting one-month high following expectations that top oil producing nations might come together to discuss a cap on crude output is expected to help the broader markets gain traction in the near term. A slew of encouraging reports from industrial output to home building to consumer outlays also suggest a pickup in economic activity.

Given these positive trends, the addition of small-cap growth mutual funds to one’s portfolio might prove to be one of the most suitable investment options. Risk-taking investors, who give precedence to capital appreciation over dividend payout, may consider small-cap growth mutual funds for healthy returns.

Oil Prices Rallied Northward

In recent times, the Russian energy minister Alexander Novak said that his country is in consultation with Saudi Arabia and other oil producers to achieve stability in the oil market. His comments were preceded by an encouraging statement from Saudi Arabia’s energy minister. The largest non-OPEC oil exporter, Russia, along with its OPEC counterpart, Saudi Arabia, flared up speculation of a collective production cap.

Moreover, Saudi Arabia’s energy minister Khalid al-Falih said that OPEC and non-OPEC nations should come together “to take any” necessary action “to help the market rebalance.” Mr. Falih hinted that Saudi Arabia along with other oil producing nations might be willing to discuss limiting crude output.

Separately, the International Energy Agency (IEA) lowered its global crude demand forecast for 2017, but also said that their balances do not show any “oversupply during the second half” of 2016.

WTI crude increased 2% in the last one month to $46.58 a barrel, posting its highest settlement price since July 15. Brent crude also rose 4% in last one month to $49.23 per barrel.

Economic Data to Watch For

Encouraging positive economic data also bolstered investor sentiment. Industrial production in July saw its biggest gain in 20 months. The Board of Governors of the Federal Reserve System reported that industrial production increased 0.7% in July, posting its highest percentage increase since Nov 2014. According to the U.S. Department of Commerce, housing starts also rose 2.1% in July from June to a seasonally adjusted annual rate of 1,211,000.

Personal consumption expenditure that measures how much Americans spent on everything rose 0.4% in June from May, according to the Commerce Department. Consumer spending, which accounts for almost 70% of economic activity, increased 0.3% in June. Spending from April to June reflected the biggest quarterly increase since the seven-year old recovery began in mid-2009. Moreover, disposable personal income also increased 0.2% in June.

Buy These 4 Small-Cap Growth Mutual Funds

Each of the three key U.S. indexes hovered near their respective record high levels. With recent gains in markets, one should consider investing in small-cap growth funds.

Growth funds focus on realizing an appreciable amount of capital growth by investing in stocks of firms whose value is projected to rise over the long term. Also, small-cap funds tend to offer stronger growth potential compared to large- and mid-cap counter parts. However, a relatively higher tolerance to risk and the willingness to park funds for the longer term are necessary when investing in these securities.

Here, we put the spotlight on four small-cap growth mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) and have encouraging year-to-date returns. They also have minimum initial investment within $5000 and low expense ratios.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

Brown Advisory Small-Cap Growth Investor (BIASX - Free Report) seeks capital growth by investing mainly in equity securities. BIASX invests the bulk portion of its assets in securities of small cap U.S. companies. These companies are expected to have above-average growth prospects. Annual expense ratio of 1.14% is lower than the category average of 1.40%. BIASX has year-to-date return of 9.8%.

Fidelity Advisor Small Cap Growth A (FCAGX - Free Report) invests the majority of its assets in small-cap companies, which are believed to have above-average growth potentials. FCAGX seeks appreciation of capital for the long run by investing in both domestic and foreign companies. Annual expense ratio of 1.20% is lower than the category average of 1.40%. FCAGX has year-to-date return of 8.3%.

TCM Small Cap Growth (TCMSX - Free Report) seeks long term capital growth. TCMSX invests more than 80% of its assets in securities of companies which falls within the range of the Russell 2000 Index. Annual expense ratio of 0.93% is considerably lower than the category average of 1.40%. TCMSX has year-to-date return of 7.1%.

T. Rowe Price QM US Small-Cap Growth Equity (PRDSX - Free Report) invests the lion’s share of its assets in securities of small-cap growth companies. PRDSX invests mainly in domestic companies, but may also invest about one-tenth of its assets in foreign companies. The fund seeks capital appreciation for the long run. Annual expense ratio of 0.82% is significantly lower than the category average of 1.40%. PRDSX has year-to-date return of 7.6%.

Want key mutual fund info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>



More from Zacks Mutual Fund Commentary

You May Like