Sizing Up

Find big-time rewards in ultra-small-cap stocks.
Magazine Contributor
2 min read

This story appears in the April 2003 issue of Entrepreneur. Subscribe »

There's a saying about how great gifts come in small packages. That can even be true on Wall Street. The tiniest of small-cap stocks, called ultra-small-cap stocks, represent companies with market capitalizations of less than $120 million. One of the sweet things about these firms is that they can be rewarding to investors who don't mind volatility and are investing for the long term.

One problem, however, is there aren't many with long-term track records still open to investors. The Bridgeway Ultra-Small Tax-Advantaged Fund (BRSIX) is an exception. It's been around since 1997 and has had only one down year--1998, when its total return was off 1.8 percent. It has yet to deliver a capital gains tax to its shareholders, and, through December 27, 2002, the fund's year-to-date total return was 4.4 percent. Not too shabby, considering the average small-cap value fund was down nearly 10 percent through that same time period, according to Lipper Analytical Services.

This is a "quant" fund, which means its manager, John Montgomery, doesn't kick the tires of the companies he's interested in--he lets his computer model do all the work. And he's kept the fund's expenses low, bolstering shareholder returns.

While ultra-small-cap companies carry risk, those with steel stomachs might find them an interesting diversifier to their portfolio.


Dian Vujovich is an author, syndicated columnist and publisher of investing site www.fundfreebies.com.

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