Small Caps In the United States

Small Caps In the United States

We have known Mary Lisanti for a pretty long time and consider her

to be one of the best small cap growth portfolio managers around.

She does have a lot of beta in her portfolio because she invests in

small caps that are growing by 30% per year or more. I have owned

her fund for over a decade because I believe over the long-cycle

Mary is going to make me money. We rang her up the other week

and asked if she might be able to do a conference call with us for our

financial advisors and she said “yes.” The reason for the call is that

small caps came down less in the January/February Flop and felt to

us like they are set to outperform. The call is scheduled for next

Thursday (4-12-18) at 4:15 p.m. with dial in number of 877.375.7934

(no passcode). In talking with Mary she made the following points:

I also think one of the interesting things I want to mention on

the call is the impact of Tax Reform on small caps. I look at it

this way: most of the smaller companies are going to get a “pot

of money” due to the lowering of their tax rates. Most of them,

based on our conversations with them, will invest part of it to

accelerate growth. The success of this effort will probably

follow the typical “bell curve” that most groups of human

beings fall into: most will succeed to some extent; some will

fail, and some will succeed spectacularly. That meant two

things to me: dispersion among individual issues within small

caps will only increase, and active managers might actually be

useful in identifying those companies that can succeed

spectacularly. Most importantly, this scenario will go on not

just for one year, but for probably 5-10 years.

Of course her “active management” is music to our ears because we

have been advocating active over passive management for about a

year. We asked Mary to share with us some of her stock ideas that

are covered by Raymond James’ fundamental analysts with

favorable ratings. The names she mentioned were: XPO Logistics

(XPO/$98.64/Outperform), Insulet (PODD/$86.08/Outperform), and

New Relic (NEWR/$75.54/Outperform).

From ‘Morning Tack’ written by Jeffrey Saut, Published by Raymond James

& Associates