Rice Hall James Small Cap Portfolio: Small Stocks, Less Risk, Big Rewards

The managers of this fund have a game plan and stick to it.

Rice Hall James Small Cap Portfolio (symbol RHJMX) has been a leading performer in one of the hottest areas of the market: small-company stocks. (See Can Small-Company Stocks Continue Their Big Rally Up?) The fund, led by its four San Diego–based managers, has climbed the charts by seeking stocks whose potential gains far outweigh potential losses.

The managers accomplish their mission by digging up overlooked, fast-growing companies. They want firms that they think can deliver annual earnings gains of 15% to 30% over the next three years and whose price-earnings ratios are below their growth rates, a strategy known as growth at a reasonable price, or GARP. And with just $82 million in assets, the fund is small enough to be able to trade nimbly -- a real edge in the small-cap arena.

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Jennifer Schonberger
Staff Writer, Kiplinger's Personal Finance