Tariff worries have hurt stocks in companies of all sizes. But small-company stocks bore the brunt of the pain. The Russell 2000 Index fell as much as 28% from peak to trough during the worst of the market selloff earlier this year.
A small recovery has helped lift returns – some. All told, over the past 12 months, the benchmark logged a slim, 1.2% gain. The T. Rowe Price Small-Cap Value Fund (PRSVX) – a member of the Kiplinger 25, our favorite no-load mutual funds – fared better with a 3.0% gain.
Fund manager David Wagner spent the market's worst days being a contrarian. He trimmed stakes in utility stocks and real estate investment trusts (REITs), which were performing well, and invested in "the most economically sensitive and tariff-exposed names," says Wagner, including retail and restaurant businesses, as well as materials and chemicals companies with exposure to global trade.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free 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.
"People were overreacting to potential changes in tariffs. I'm not saying we don't view it as a problem, but none of this stuff is settled," he says.
Betting on better results
Wagner bought a stake in shoe company Steven Madden (SHOO) after the shares lost nearly half their value. It is the number-one importer of women's shoes in the country, he says, with a big chunk coming from China. Since hitting a low in mid-April, the stock has recovered 27%.
Wagner likes to focus on unloved fare, but lately he says he's drawn to companies with a "differentiated" approach.
Carvana (CVNA), for instance, "has upended the way people buy used cars," he says. He bought the stock as the firm teetered toward bankruptcy for $30 a share in late 2023; it recently traded for $327.
"It's a large cap now,” he says. "But we let it run. We invest with a long time horizon, and we don't sell arbitrarily when stocks surpass" small-cap measures.
Wagner has run Small-Cap Value since mid-2014. Over the past decade, his 7.7% annualized return beat 72% of his peers.
This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
Related Content
-
Stocks Slide to Start September: Stock Market TodaySeasonal trends suggest tough times for the stock market as we round into the end of the third quarter.
-
Here's What You'd Have If You Invested $1,000 Into Sherwin-Williams 20 Years AgoSherwin-Williams stock has clobbered the broader market by a wide margin for a long time.
-
Stocks Slide to Start September: Stock Market Today
Seasonal trends suggest tough times for the stock market as we round into the end of the third quarter.
-
If You'd Put $1,000 Into Sherwin-Williams Stock 20 Years Ago, Here's What You'd Have Today
Sherwin-Williams stock has clobbered the broader market by a wide margin for a long time.
-
Where is the Foreign Dividend Boom Headed?It's been a golden six months for foreign dividend stocks, but can any be relied on for predictable income going forward? Here are some options.
-
AI Start-ups Are Rolling in CashThe Kiplinger Letter Investors are plowing record sums of money into artificial intelligence start-ups. Even as sales grow swiftly, losses are piling up for AI firms.
-
The Unsung Hero of Aisle 5: A Tale of Forgotten Change and Compassion at the SupermarketThis supermarket manager went above and beyond to help when a child forgot her change at the checkout counter. You might be surprised at some of the complications that supermarkets face when it comes to customers' forgotten change.
-
Train, Integrate, Retain: A Strategic Playbook for Adviser OnboardingsBuild a thriving practice by training new advisers with clear goals, structured processes and consistent mentorship for strong team growth.
-
I'm a Financial Professional: Here Are Four Ways You Can Use Debt to Build WealthUsing debt strategically, such as for homeownership, education and more, can lead to greater financial stability and growth.
-
Five Key Wake-Up Calls for Ambitious Business Owners, From a Biz SpecialistYour personal financial plan needs to include a formal exit strategy for your business, or you could be in trouble.
