Federal Reserve money creation and signs of economic recovery are leading me to think about the inflation trend. This may mean increasing my position in small cap value stocks. Investment management requires being forward looking and anticipating where potential rewards are greater than the risk being assumed. I have been overweight in dividend paying blue-chip stocks for several years. These stocks have become very popular and no longer the bargains they were in 2008-09.
Small Cap Value Investing
Small cap value stocks are fertile ground to find undervalued stocks. This category is not well covered by analysts and individual investors who either lack the time or skills to properly research individual companies. Therefore many “gems” are not discovered, or at least are not subject to the hype and inevitable collapses suffered by many promoted stocks. During rising inflation small cap companies have the ability to adapt quicker than larger companies.
What is the best way to invest in small cap stocks? Recent circumstances have caused me to change my mind when answering this question. Until recently I believed that ETFs were the best investment vehicle. But the facts have changed; and adapting is part of successful investing.
In a post last week I laid out Why Value Investors Should Avoid Most Value ETFs and Mutual Funds. Most value funds are loaded with high risk financial service stocks. It’s unacceptable for me to have more than 20% of my ETF (many value ETFs have more than 20% in financial services) in stocks I wouldn’t even think about owning right now.
Therefore I think individual value stock picks are the best way to invest in small cap stocks. Even though I am portfolio manager of the Arbor Asset Allocation Model Portfolio (AAAMP); I don’t have the time to do the deep research required for small cap investing. Therefore I rely on a service to provide me the initial research for stock picks I may want to include in the AAAMP.
Value Stock Guide Review
If you can benefit from a small cap value stock picking service I suggest you consider Shailesh Kumar’s Value Stock Guide. His service provides his best small cap value stock picks as he shares his personal transactions with subscribers.
Other than receiving his Value Stock Guide I have no business dealings with Mr. Kumar. In other words, I’m not being paid for this post or receive any kind of compensation for referrals. The AAAMP Blog is about sharing with you the most effective ways to manage your own money.
Investors interested in small cap value investing should consider avoiding value etfs and mutual funds and instead pick individual stocks. It may be advantageous to find a deep value investing research service for initial ideas on small cap value stock picks for your portfolio.
Related Reading: Benefits of Using the AAAMP Value Investing Guide