Good things come in small packages.Hot tech stocks fuel success of small-cap Small-cap A stock with a small capitalization, meaning a total equity value of less than $500 million. small-cap 1. Of or relating to the common stock of a relatively small firm having little equity and few shares of common stock growth funds To paraphrase par·a·phrase n. 1. A restatement of a text or passage in another form or other words, often to clarify meaning. 2. The restatement of texts in other words as a studying or teaching device. v. a market cliche as technology goes, so go small-cap growth stocks. That was especially true in 1999, as small-cap growth funds benefited from investors' love affairs with technology shares and last year's hot initial public offering market, dominated by Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the and related technology companies. Small-growth fund managers definitely took advantage of these trends, leading to one of their best performances in years. "Small growth was the top performing domestic equity category" in 1999, says Valerie Putchaven, an analyst at Chicago-based mutual fund research firm Morningstar "The top 10 funds all had returns of over 100%. That's very unusual" According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Morningstar, the small-cap growth fund sector had an average return of 56.21%. That represents a comeback Comeback Australian breed of wool sheep, bred by crossing Merino with Corriedale, Polwarth or Zenith sheep; wool is 21 to 25 microns. It is a registered breed, but the term is more commonly used in the sense of a type of sheep produced by crossbreeding a crossbred Merino back to Merino. from 1997 and 1998, two challenging years for small-cap growth stocks, say analysts and fund managers. The top performing small-cap growth funds had healthy positions in technology. Another key similarity Similarity is some degree of symmetry in either analogy and resemblance between two or more concepts or objects. The notion of similarity rests either on exact or approximate repetitions of patterns in the compared items. : the top five portfolios were managed by smaller, more nimble nim·ble adj. nim·bler, nim·blest 1. Quick, light, or agile in movement or action; deft: nimble fingers. See Synonyms at dexterous. 2. fund complexes specializing in small- and mid-cap Mid-cap Short for "Middle Cap," mid cap refers to stocks with a market capitalization of between $2 billion to $10 billion. Notes: As the name implies, a mid-cap is in the middle of the pack. A mid-cap isn't too big, but at the same time has a relatively decent market cap. companies. Take the $5 billion RS Emerging Growth fund (Nasdaq: RSEGX), run by portfolio manager Jim Callinan. Sponsored by RS Investment Management in San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden , the fund has a high exposure to tech names--about 54% at the end of 1999. It also holds more than 150 stocks in the portfolio, spreading its risk across a variety of tech sectors. "Last year we had just come off of one of the worst bear markets for small-cap growth stocks," says Callinan, who is also chief investment officer of RS Investment Management. "I was very aggressively postured" in select areas of the Internet and other technology sectors. RS Emerging Growth enjoyed a total return of 182.51% for the year, according to Morningstar, handily hand·i·ly adv. 1. In an easy manner. 2. In a convenient manner. Adv. 1. handily - in a convenient manner; "the switch was conveniently located" conveniently 2. beating the average return of small-cap growth stocks. Stocks that helped the fund achieve its performance: Bea Systems BEA Systems, Inc. (NASDAQ: BEAS) is one of the major companies developing enterprise infrastructure software. BEA makes middleware, products that help software run on top of databases. (Nasdaq: BEAS), Knight/Trimark Group (Nasdaq: NITE nite n. Informal Night. ) and Network Solutions (Nasdaq: NSOL), its current top three holdings as of December 31,1999. Meanwhile, a long- term buy-and-hold strategy Buy-and-hold strategy A passive investment strategy with no active buying and selling of stocks from the time the portfolio is created until the end of the investment horizon. Opposite of active strategy. worked for Lee Kopp, president of Kopp Investment Advisors Investment Advisor 1. A person making investment recommendations in return for a flat fee or percentage of assets managed, known as a commission. 2. For mutual fund companies, it is the individual who has the day-to-day responsibility of investing and monitoring the cash and in Minneapolis and portfolio manager of the $1 billion Kopp Emerging Growth fund (Nasdaq: KOPPX). "We look for strong management teams and companies in the right areas and we hold them for quite some time," from five to 10 years, Kopp says. The fund has an even bigger weighting in tech stocks than some of its peers, with more than 80% in the sector. The remainder is mostly in healthcare companies. Some of the high fliers in the portfolio include: Digital Microwave (Nasdaq: DMIC DMIC Door Mounted Inflatable Curtain DMIC Discrete Memoryless Interference Channel ), Macrovision (Nasdaq: MVSN MVSN Milizia Volontaria per la Sicurezza Nazionale (Italy) ), and SDL (Specification and Description Language) A modeling language used to describe real time systems. It is widely used to model state machines in the telecommunications, aviation, automotive and medical industries. (Nasdaq: SDLI). Kopp Emerging Growth returned 148.20% last year. But with the success of small-cap growth funds comes risk. Portfolios can become too unwieldy to manage, as new investors pour cash into the latest hot performers. To guard against that, several, like Kopp Emerging Growth, have closed to new investors. Kopp says he had already committed to closing the fund once it reached $1 billion in assets--it officially closed February 7. Another concern: the possibility of "in-and-out" investors buying then selling shares of the fund too quickly, potentially forcing redemptions and disrupting its operations. But Callinan has welcomed the new money flowing into his fund. He's used some of the cash to beef up his research staff. He now has five analysts working with him, up from two at the beginning of 1999. TOP 5 SMALL-CAP GROWTH FUNDS
6-Month 1-Year 3-Year
Total Total Total
Fund Name (Ticker) Return Return(*) Return
Van Wagoner Post-Venture (VWPVX) 73.35% 237.22% 59.71%
Van Wagoner Micro-Cap (VWMCX) 73.52 207.88 40.85
RS Emerging Growth (RSEGX) 88.81 182.51 62.45
RS Diversified Growth (RSDGX) 72.84 149.97 55.64
Kopp Emerging Growth (KOPPX)(**) 82.47 148.20 N/A
Small-Cap Growth Stock Fund Averages 40.84 56.21 21.94
5-Year
Total Toll-Free
Fund Name (Ticker) Return Number
Van Wagoner Post-Venture (VWPVX) N/A% 800-228-2121
Van Wagoner Micro-Cap (VWMCX) N/A 888-228-2121
RS Emerging Growth (RSEGX) 44.36 800-766-3863
RS Diversified Growth (RSDGX) N/A 800-766-3863
Kopp Emerging Growth (KOPPX)(**) N/A 800-333-9128
Small-Cap Growth Stock Fund Averages 22.53
Minimum
Initial
Fund Name (Ticker) Investment
Van Wagoner Post-Venture (VWPVX) $1,000
Van Wagoner Micro-Cap (VWMCX) 1,000
RS Emerging Growth (RSEGX) 5,000
RS Diversified Growth (RSDGX) 5,000
Kopp Emerging Growth (KOPPX)(**) 5,000
Small-Cap Growth Stock Fund Averages
(*) Ranked by cumulative total return as of 12/31/99. (**) Fund closed to new investors. Source: Morningstar Inc. BOTTOM 5 SMALL-CAP GROWTH FUNDS
6-Month 1-Year 3-Year
Total Total Total
Fund Name (Ticker) Return Return(*) Return
Nicholas Limited Edition (NCLEX) -3.47% -3.87% 9.14%
Firstar Emerging Growth
Ret A (FREMX) 12.59 4.22 N/A
ISG Small Cap
Opportunity A (ISOAX) -0.29 4.72 6.53
Kaimar "Growth-With-Value" 6.01 6.01 N/A
Small Cap (KGSCX)
Fasciano (FASCX) 4.19 6.16 11.41
Small-Cap Growth
Stock Fund Averages 40.84 56.21 21.64
5-Year
Total Toll-Free
Fund Name (Ticker) Return Number
Nicholas Limited Edition (NCLEX) 15.57% 800-227-5987
Firstar Emerging Growth
Ret A (FREMX) N/A 800-228-1024
ISG Small Cap
Opportunity A (ISOAX) 14.19 800-852-0045
Kaimar "Growth-With-Value" N/A 800-282-2319
Small Cap (KGSCX)
Fasciano (FASCX) 18.07 800-848-6050
Small-Cap Growth
Stock Fund Averages 22.53
Minimum
Initial
Fund Name (Ticker) Investment
Nicholas Limited Edition (NCLEX) $2,000
Firstar Emerging Growth
Ret A (FREMX) 1,000
ISG Small Cap
Opportunity A (ISOAX) 1,000
Kaimar "Growth-With-Value" 10,000
Small Cap (KGSCX)
Fasciano (FASCX) 1,000
Small-Cap Growth
Stock Fund Averages
(*) Ranked by cumulative total return as of 12/31/99. Source: Morningstar Inc. |
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