A Top Manager’s Take on Small-Cap Stocks Today

Christopher Franz: Hi, I’m Chris Franz with Morningstar. I’m here with Keith Lee, President of Brown Capital Management and a Portfolio Manager of Gold-rated Brown Capital Management Small Company.

Keith, thanks for joining me.

Keith Lee: Thank you. Thank you for having me.

Franz: So, Keith, you're a tenured growth manager. You've been on the strategy since its launch in 1992. And you and your team have a very specific small-cap focus. Curious to get your thoughts on markets today.

Lee: Chris, let me just say upfront, we don't spend a lot of time trying to predict markets. And one reason is because we're not very good at it. Now, that said, because when--and also, we take the long term, so we do not try and determine or predict what markets are going to do over the next quarter or even the next year. That said though, we do like having the economic wind at our back. And when we look at markets, particularly in small-cap spaces, as you would call it, we call it small company, we think markets are a little frothy, and they have been for a while. But because of the types of companies that we look for, we can find exceptional small companies in just about all markets. And when you look at GDP growth, and we've been saying this, or I've been saying this for about the last five years or so, if we can get 2%, 2.5% GDP growth--and I know, over the last two years, it's been up as high on a quarterly basis about 3.5%, last report was 2.1%--we don't think that there will be a recession, and markets will continue to do fairly well. But with the backdrop of the political situation, meaning the tariffs and global trade concerns, we expect markets to continue to be volatile. And that's been the case for a while, and we don't see anything on the horizon that would change that.

Franz: Interesting. Well, Keith, thanks for your insight.

Lee: Thank you.

Franz: For Morningstar, I’m Chris Franz. Thanks for watching.