Four Tiny but Potent Mutual Funds
Let's get really contrarian.
Let's get really contrarian and take a look at some of the smallest funds in the Morningstar 500. They're being ignored by fund investors, but they've really got a lot to like.
Queens Road Small Cap Value (QRSVX)
Manager Steve Scruggs has done a great job of deep value investing at this fund, as its 4-star Morningstar Rating indicates. He's produced great results since the fund was launched in 2002. Its return on $10,000 since that time is $25,500 versus $20,100 for the average small-value fund. Yet, with an asset base of just $57 million, the fund has plenty of flexibility to buy the neglected small-cap names it covets.
Scruggs looks for companies dominating their niche, such as publisher Scholastic (SCHL), and throwing off a lot of cash. Interestingly, that has led him to a sizable tech weighting--27% of stocks--and a light financials weighting (10% of stocks). However, Scruggs is buying cheaper, more-mundane tech stocks than those such as Google (GOOG). He owns Tech Data (TECD), a big distributor of hardware and software to information technology departments, and Hurco (HURC), which makes software and systems for metal cutting.
Russel Kinnel does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.