Kip 25

American Century Small Cap Value (ASVIX) Joins the Kiplinger 25

American Century's small-cap-focused ASVIX consistently delivers high returns with average risk, and bears little resemblance to its benchmark.

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.

“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.

Most Popular

25 Best Kirkland Products You Should Buy at Costco
Smart Buying

25 Best Kirkland Products You Should Buy at Costco

Many of warehouse club Costco's store-branded Kirkland Signature items get high marks for quality and value. Check out our picks.
July 21, 2021
Warning: You May Have to Pay Back Your Monthly Child Tax Credit Payments
Tax Breaks

Warning: You May Have to Pay Back Your Monthly Child Tax Credit Payments

Unlike stimulus checks, you might have to repay your monthly child tax credit payments if you get too much money from the IRS.
July 16, 2021
13 States That Tax Social Security Benefits
social security

13 States That Tax Social Security Benefits

You may have dreamed of a tax-free retirement, but if you live in these 13 states, your Social Security benefits are subject to a state tax. That's on…
July 26, 2021

Recommended

Readers Find Some Weird Winners
Investing for Income

Readers Find Some Weird Winners

Most of the time, I find flaws in offbeat investments with high distributions. But sometimes oddities have their day of glory.
July 30, 2021
I Still Like the Trillion-Dollar Stocks
Becoming an Investor

I Still Like the Trillion-Dollar Stocks

Unlike the highfliers of the late 1990s, these trillionaires make tons of money.
July 29, 2021
How to Play the High-Yield Rally
Becoming an Investor

How to Play the High-Yield Rally

Junk bonds have been on a tear, so this fund has shifted to defense.
July 29, 2021
How to Profit From ETFs
Becoming an Investor

How to Profit From ETFs

Exchange-traded funds aren’t new, but they’re still red-hot. Here’s a detailed look at why you should consider these investment vehicles, for both you…
July 29, 2021