12.10.2009 / Small Cap Equity Strategy Performing Well. Posting by Randall Greer, FNBO Managing Director of Equity Strategy
Returns in the small cap market have provided investors with a wild ride over the last couple of years. The small cap market lost approximately 60 percent of its value from July 2007 to March 2009, as measured by the Russell 2000 Index (1). Many issues have contributed to this downturn: high energy prices, the falling U.S. dollar, unwinding of an overextended U.S. real estate market, over-leveraged U.S. consumers, a U.S. economic recession that began in December 2007, bankruptcies of major U.S. financial institutions, and a lack of oversight by regulators of the financial system, among others.
Subsequent to the market correction, a significant rally of approximately 65% since March 2009 (1) has helped to relieve some of the sting from prior losses. Investors have been encouraged by a potential bottoming in bad economic news, but the lack of overwhelming evidence could mean the rally is short lived. Despite the strong recent performance, the Russell 2000 Index remains 34% below its July 2007 high (1).
Our commitment to a common sense, proven investment philosophy has helped our Small Cap Equity strategy successfully navigate these rough waters. For the 3 years ending October 2009, the strategy has returned -1.85% annualized, exceeding the performance of its industry benchmark the Russell 2000 by nearly 7%. In addition, the strategy’s 4.46% annualized return over the 5 years ending October 2009 outperformed the benchmark by almost 4%(1).
Our approach to investing identifies quality companies that are temporarily priced below their long-term intrinsic value. Purchases are made primarily on the merits of each individual company, maintaining a diversified portfolio across the various economic sectors. Over the long-term, we believe that our philosophy of owning higher quality businesses at reasonable prices will generate favorable returns for investors while exposing them to less risk than the average small cap manager.
For more information on First National Bank’s First Investment Group, visit www.firstnational.com and click on Planning & Investment Services or email firstfocusfunds@fnni.com
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(1) Source: Bloomberg
Comments are provided as general market commentary and should not be considered investment advice or predictive of any future market performance. Past performance does not guarantee future results.
Investments are: Not FDIC Insured • May Go Down in Value • Not a Deposit • Not Guaranteed By the Bank • Not Insured By Any Federal Government Agency
Small Cap Equity strategy returns quoted above are from the Small Cap Equity Value Composite. A complete list and description of the firm's composites are available on request.
