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3 Buy-Ranked Small-Cap Blend Mutual Funds

Small-cap blend funds are a type of equity mutual fund which hold in their portfolio a mix of value and growth stocks, where the market capitalization of the stocks is generally lower than $2 billion. Blend funds are also known as “hybrid funds”. Blend funds aim for value appreciation by capital gains. They owe their origin to a graphical representation of a fund’s equity style box. In addition to diversification, blend funds are great picks for investors looking for a mix of growth and value investment. Meanwhile, small-cap funds are a good choice for investors seeking diversification across different sectors and companies. Investors with a high risk appetite should invest in these funds. Below we will share with you 3 buy-rated small-cap blend mutual funds. Each has earned either a Zacks Mutual Fund Rank #1 (Strong Buy) or a Zacks Mutual Fund Rank #2 (Buy) , as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all small-cap blend mutual funds, investors can click here to see the complete list of funds. Fidelity Small Cap Stock Fund No Load (MUTF: FSLCX ) seeks capital appreciation over the long run. FSLCX uses a “blend” strategy to invest in small-cap companies having market capitalizations within the range of the Russell 2000 Index or the S&P SmallCap 600 Index. Factors including financial strength and economic condition are considered before investing in securities of companies throughout the globe. The Fidelity Small Cap Stock Fund has returned 6.5% over the past one year. Lionel T. Harris is the fund manager and has managed FSLCX since 2011. Lord Abbett Alpha Strategy Fund A (MUTF: ALFAX ) is a “fund of funds” that generally invests in mutual funds of Lord, Abbett & Co. LLC. ALFAX invests in value and growth stocks of companies located all over the world. The fund invests in companies having micro-, small- and mid-cap market capitalizations. The Lord Abbett Alpha Strategy A fund has returned 2.6% over the past one year. As of June 2015, ALFAX held 7 issues, with 20.18% of its total assets invested in the Lord Abbett Developing Growth I fund. TIAA-CREF Small-Cap Equity Retail Fund Adv (MUTF: TCSEX ) seeks favorable returns over the long term. TCSEX invests heavily in domestic small-cap companies having market capitalizations identical to those included in the Russell 2000 Index. The fund primarily invests in small-sized companies across different sectors. The TIAA-CREF Small-Cap Equity Retail fund has returned 4.9% over the past one year. TCSEX has an expense ratio of 0.78%, compared to a category average of 1.24%. Original Post Share this article with a colleague

Stocks Higher 10 Years From Now

Before the onset of the market weakness in the early part of last week and the end of the prior week, S&P Dow Jones Indices released a report highlighting rolling 10-year annualized returns for the S&P 500 index. The report seems prompted by a response Warren Buffett made to a question on timing the market. Buffett noted he was not a market timer, and simply responded, “Stocks are going to be higher, and perhaps a lot higher, 10 years from now. I am not smart enough to pick times to get in and get out.” In the report, S&P notes: “Since 1947, the S&P 500’s price return was up in 72% of calendar years. Add in dividends reinvested and that batting average jumped to 80%.” “And if one is worried that the S&P 500 has gone too far since the conclusion of the 2007-09 mega-meltdown bear market, consider that the rolling 10-year CAGR through Q2 2015 was +7.9%, nearly 400 basis points below the long-term average.” “… there have been times when things didn’t work out too well for investors, but these times were few and isolated. Of the 278 quarters of rolling 10-year CAGRs from Q1 1946 through Q2 2015, only eight were negative, and they all occurred between Q4 2008 and Q3 2010.” (Source: S&P Dow Jones Indices ) The S&P report contains additional detail on sector returns going back to 1990 and investors should find the entire report a worthwhile read. One sector highlight noted in the report is the fact that, “… each sector recorded very high monthly 10-year CAGR batting averages, or frequencies of positive observations, from 100% for consumer staples, energy, materials and utilities, to 79% for telecom services and 67% for financials. The S&P 500’s average was 87%.” In short, timing the market can be a difficult endeavor for many investors. Last week’s heightened market volatility is an example of this, especially for those who sold out of stocks on Tuesday. Share this article with a colleague

Value Stocks Are Still Not Attractive

There is no mystery in the ongoing behavior of value stocks against growth. It reflects a combination of low 10-year yields and a strong dollar, both of which are positive for growth stocks. As long as U.S. Treasury yields and the U.S. dollar will remain negatively correlated, value stocks may not outperform. Since the Fed started mentioning tapering, the relationship between the relative performance of value against growth and U.S. Treasury yields has broken down at least twice (see chart below). Episodes of higher yields should have benefited value stocks but did actually not. Yet, taking a long view, the long lasting underperformance of value is not really surprising – value stocks have suffered from the long decline in U.S. Treasury yields: conundrum, great recession, secular stagnation… Contrary to the late 1990s, the outperformance of growth is not linked to any bubble (Internet stocks in 98/99). From this perspective, only a significant reversal in U.S. long term yield would call for a structurally long position on value against growth. Once again the arbitrage for value when yields are going up is not linked to the growth expectations embedded in long term yields (which would call for growth stocks to outperform) but rather on the yield arbitrage (growth stocks have a much lower E/P hence a required price adjustment that is much significant than that of high E/P value stocks). The ongoing strength of the U.S. dollar also explains the relative strength of growth stocks. As can be seen below, bullish trends for the USD are generally positive for growth sub-indexes. On a three-month basis, the recent behavior of the USD would yet suggest either that growth-stock outperformance is overdue or that stocks are pricing a sharp rebound in the U.S. currency. Bottom Line: There is no mystery in the ongoing behavior of value stocks against growth. It reflects a combination of low 10-year yields and a strong dollar, both of which are positive for growth stocks (at least on a relative perspective). The question is therefore not about any “weird” behavior of value stocks but rather about the nature of the relationship between 10-year yields and the USD: how long will U.S. Treasury yields and the U.S. dollar remain negatively correlated? The chart below suggests that the correlation break is close to be the longest ever. As long as it lasts, value won’t be attractive. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Share this article with a colleague