A Good Small-Cap Fund Option

Susan Wasserman: Conestoga Small Cap has held up well in what's been a tough period for small-growth stocks.

Robert Mitchell and Joseph Monahan lead this fund and receive research support from three analysts. The team's process focuses on finding companies with strong franchises that they believe will double in value over the next three to five years. A distinguishing aspect of the approach is that the team favors companies where management has at least 10% of ownership, reflecting that management's interests are aligned with shareholders'.

The fund's composition differs from that of its Russell 2000 Growth benchmark in a few ways. First, the fund tends to have higher average net margins and lower debt to capital ratios. Second, the fund has overweight exposure to tech, industrials, and healthcare--in fact, those three sectors represent more than 80% of assets.

Sector concentration can lead to streaky performance. For example, the fund lost nearly 8% in 2014 as some of its technology picks struggled, but then bounced back with an impressive 8% gain in 2015. Since this fund's inception in 2002, it has earned a solid long-term track record with lower levels of volatility. Furthermore, the fund's investor and institutional share classes are competitively priced relative to other options in the same fee level distribution groups. Below average fees, along with a distinguished process, and tenured team, make this Silver-rated fund a strong option for those looking for a small-cap growth investment.