Skip to Content
Fund Spy

Consider Going Abroad for Small-Value Exposure

Foreign small-value stocks are generally cheaper with less debt.

Mentioned: , , ,

U.S. small-value stocks have made a nice run of late. Over the past six months, the Russell 2000 Value Index gained 44.2% through Jan. 21 versus 19.3% for the S&P 500. But small-value stocks still have a lot of ground to make up after being the worst-performing segment of the U.S. equity market over the trailing 10 and 15 years. This still makes the group a potential target for contrarian investors.

But there are good reasons why small-value stocks lagged over those periods. It is arguably the most economically sensitive part of the market, with nearly 55% of the Russell 2000 Value Index in cyclical stocks versus 31% for the S&P 500. So, these companies have borne the brunt of recent economic volatility.

To view this article, become a Morningstar Basic member.

Register for Free

Kevin McDevitt does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.