When a Kiplinger 25 fund closes to new investors, we replace it. That's because we believe the funds on our list should be available to all readers.
So even though we still like Wasatch Small Cap Value (WMCVX), because it closed to new investors in mid-March we are casting it out of the Kiplinger 25 and replacing it with American Century Small Cap Value (ASVIX).
ASVIX is small-cap and value-focused through and through.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
“We buy high-quality companies trading at attractive prices because of a transitory event,” says Jeff John, who manages the fund with Ryan Cope.
Holdings in Small Cap Value have an average market value of $2.3 billion – one-third less than the average of its peer group (funds that focus on bargain-priced small companies). Compared with the Russell 2000 Value Index, which tracks bargain-priced small-company stocks, ASVIX's portfolio boasts a lower average price relative to book value, or the value of a company’s assets minus its liabilities.
But quality matters most at Small Cap Value. When John, Cope and three dedicated analysts analyze prospective investments, each company receives a quality grade that scores its financial health, balance sheet strength and management.
The best holdings generate plenty of free cash flow (money left over after expenses necessary to maintain the business) and reinvest it wisely.
“We’re not going for home runs. We’re looking for singles and doubles,” says John. “Stocks with the highest conviction and quality scores have the biggest weighting in the fund.”
The result is a portfolio that bears little resemblance to the Russell 2000 Value benchmark. The fund holds far more of its assets in tech and consumer stocks, for instance, while energy and materials firms count for less.
“We need a differentiated portfolio to get differentiated returns,” says John.
The fund consistently delivers high returns with average risk. Since John took over as portfolio manager in 2012, Small Cap Value has returned 14.2% annualized, which beats its benchmark and its peers. (Cope became a manager last year.) Two strong performers over the past year are financial services firm Signature Bank (SBNY) and Penske Automotive (PAG), which operates car and commercial truck dealerships.
-
Stock Market Today: Solid Signals Lift Stocks Despite Tariff NoiseMarkets are whistling over the White House in an ongoing display of corporate America's enduring ability to survive and advance.
-
Amtrak Joins Prime Day With Deals on Fares — But You’ll Have to Act FastPrime members can score 20% off midweek fares — what travelers should know before booking.
-
Bond Basics: Zero-Coupon Bondsinvesting These investments are attractive only to a select few. Find out if they're right for you.
-
Bond Basics: How to Reduce the Risksinvesting Bonds have risks you won't find in other types of investments. Find out how to spot risky bonds and how to avoid them.
-
What's the Difference Between a Bond's Price and Value?bonds Bonds are complex. Learning about how to trade them is as important as why to trade them.
-
Bond Basics: U.S. Agency Bondsinvesting These investments are close enough to government bonds in terms of safety, but make sure you're aware of the risks.
-
Bond Ratings and What They Meaninvesting Bond ratings measure the creditworthiness of your bond issuer. Understanding bond ratings can help you limit your risk and maximize your yield.
-
Bond Basics: U.S. Savings Bondsinvesting U.S. savings bonds are a tax-advantaged way to save for higher education.
-
Bond Basics: Treasuriesinvesting Understand the different types of U.S. treasuries and how they work.
-
Bond Basics: Ownershipinvesting Bonds come in a variety of forms, but they all share these basic traits.
