At Extreme Investor Network, we are constantly monitoring the market to provide our readers with valuable insights and opportunities to maximize their investment potential. This month, we have noticed a significant rotation into small cap stocks, particularly those that are undervalued. This trend is a clear indication that investors are seeking out value in the market.
When it comes to small-cap stocks, the value factor is key. Our analysis shows that some of the top-performing nonleveraged small-cap funds in July are explicitly focused on value. For example, the iShares US Small Cap Value Factor ETF (SVAL) saw an impressive 11.4% gain compared to the broader iShares Russell 2000 ETF (IWM) which only saw a 7.4% increase.
This small-cap rally can be attributed to various factors, including the anticipation of a Fed rate cut in September. However, it is important to note that profitable companies are in a better position to weather economic uncertainties. By focusing on stocks with lower price-to-earnings ratios, investors can identify strong potential opportunities within the small-cap sector.
One fund that has caught our attention is the Pacer US Small Cap Cash Cows 100 ETF (CALF), which focuses on stocks with strong free cash flow. While it may be underperforming the broader market in July, it has shown strong performance over the past three and five years.
It is crucial to exercise caution when screening for value stocks, as some funds may have high exposure to risky assets like regional banks. This is where active management can be beneficial, as skilled managers can identify and avoid potential pitfalls in the market.
At Extreme Investor Network, we believe in providing our readers with unique insights and opportunities to navigate the ever-changing landscape of investments. By staying informed and strategic in your investment decisions, you can position yourself for long-term success in the market. Stay tuned for more updates and tips on maximizing your investment potential with us.