Small caps

You get higher bond yields.

Why are small caps still doing so well? You would have never thought that.

Well, I think it's because of fundamentals, because of earnings.

They were really the first earnings driver and the price-to-free cash flow driver that has really been the fundamental backing of these small caps.

And now the revival of the MAG-7, and we're going into Apple tomorrow.

It's set up perfectly to, again, outperform.

Had finance, fi- financial stocks working all year and all year last year for the most part.

Um, healthcare this year, small caps coming outta nowhere.

Yeah, small caps has really been a surprise.

Industrials had a run.

I know, I know they've pulled back, but they had a big run.

And kudos to Mike Wilson, our other friend and partner, um, you know, of many years whom it used to be my direct boss, uh, 10 years ago, who had a small caps call, uh, earlier this year, late last year.

Right.

So yeah, I think that's been one of the surprises as well.

But before we jump into the mechanics of the vehicles themselves, we really need to establish the terrain.

I mean, why should an investor even bother with small caps when a handful of giant tech companies completely dominate the daily headlines?

It seems like a fair question, right? Why take the risk on smaller, unproven businesses?

Well, it really comes down to historical outperformance over the long haul.

When you look at the data from Bank of America, the numbers kind of speak for themselves.

Oh, absolutely.

Since 1925, small caps have delivered nearly 16 percent annually.

Mid caps sit at 14 percent and large caps are down at 12 percent.