Small-cap funds are good choices for investors seeking diversification across different sectors and companies. Investors with a high-risk appetite should pick these funds. Small-cap funds generally invest in companies with a market cap lower than $2 billion. The companies, though smaller in size, offer growth potential and their market capitalization may increase subsequently.
Meanwhile, value stocks tend to trade at a price lower than their fundamentals (i.e., earnings, book value, debt-equity). It is common for some investors to consider value funds for income or yield. However, not all value funds consist solely of companies that primarily use their earnings to pay dividends. Investors interested in choosing value funds for yield should make sure to check the mutual fund yield. The mutual fund yield is dividend payments divided by the value of the mutual fund’s shares.
Below, we share with you three small-cap value mutual funds, namely, DFA U.S. Targeted Value Portfolio DFFVX, Putnam Small Cap Value PSLAX and Goldman Sachs Small Cap Value Insights GSATX. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.
DFA U.S. Targeted Value Portfolio fund invests most of its net assets in a well-diversified portfolio of readily marketable domestic small and mid-cap companies, which, according to its advisor, are value stocks with high profitability. DFFVX advisors also invest in futures and options contracts of U.S. equity securities and indices.
DFA U.S. Targeted Value Portfolio fund has a three-year annualized return of 7.3%. As of the end of October 2024, DFFVX held 1456 issues, with 1% of its net assets invested in Chesapeake Energy.
Putnam Small Cap Value fund invests most of its net asset common stocks of domestic small-cap value stocks with market capitalization similar to the companies listed on the Russell 2000 Value Index at the time of purchase. PSLAX chooses to invest in companies based on valuation, financial strength and growth potential, along with their competitive position in the industry, projected future earnings, cash flows and dividends.
Putnam Small Cap Value fund has a three-year annualized return of 4.9%. PSLAX has an expense ratio of 0.57%.
Goldman Sachs Small Cap Value Insights fund invests most of its assets, along with borrowings, if any, ina broadly diversified portfolioof small-cap companies. GSATX advisors also invest in foreign issuers traded in the United States.
Goldman Sachs Small Cap Value Insights fund has a three-year annualized return of 3.9%. Joseph Kogan has been the fund manager of GSATX since February 2024.
To view the Zacks Rank and the past performance of all small-cap value mutual funds, investors can click here to see the complete list of small-cap value mutual funds.
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This article originally published on Zacks Investment Research (zacks.com).
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