Small-cap value mutual funds are an excellent choice for investors on the lookout for a bargain, i.e., stocks at a discount, with impressive growth potential. Value mutual funds are those that invest in stocks trading at a discount to book value, have low price-to-earnings ratio and high dividend yields. Value investing has always been a popular strategy, and for a good reason.
Investors with a high risk appetite also find small-cap funds intriguing as small-market capitalization has a higher growth potential than large or mid-cap companies. Small-cap funds generally invest in companies with a market cap below $2 billion. Also, small-cap funds are expected to provide diversification across sectors and companies.
Below we share with you three top-ranked, small-cap value mutual funds. Each has a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform peers in the near future. Investors can click here to see the complete list of all small-cap value mutual funds , their Zacks Rank and past performance.
Bridgeway Small-Cap Value BRSVX maintains a diversified portfolio by investing in securities of small-cap companies listed on the NYSE, NYSE MKT and NASDAQ. BRSVX seeks total returns mainly through growth of capital. The fund invests a bulk of its assets in undervalued small-cap stocks. Bridgeway Small-Cap Value has one-year annualized returns of 8.8%.
BRSVX has an expense ratio of 0.94% compared with the category average of 1.38%.
DFA US Targeted Value R2 DFTPX seeks appreciation of capital for the long run. DFTPX invests in a wide variety of readily marketable securities of domestic mid- and small-cap companies that are expected to be value stocks. DFA US Targeted Value R2 has returned 8.2% in the past year.
As of April 2018, DFTPX held 1,468 issues, with 0.88% of its assets invested in HollyFrontier Corp.
Prudential QMA Small-Cap Value Retirement TSVRX seeks above-average growth of capital. TSVRX invests a large chunk of its assets in equity securities of small-cap companies. The fund invests primarily in companies whose market-cap falls within the range of the S&P SmallCap 600 Index or the Russell 2000 Index. TSVRX not only invests in U.S. equity securities and REITs but also in common stocks of non-U.S. companies. Prudential QMA Small-Cap Value Retirement has returned 1.7% over a year.
Mitchell B. Stern is one of the fund managers of TSVRX since 2015.
To view the Zacks Rank and past performance of all small-cap value mutual funds, investors can click here to see the complete list of funds .
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