Megan Horneman Quoted on Small Caps in Kiplinger

Small Cap Stocks Look Cheap. Should You Buy Them Now?

After months of volatility, small caps and mid cap stocks are trading at their lowest relative valuations in decades. That’s caught the attention of strategists and long-term investors who see opportunity in areas of the market that have been hit hardest.

Small cap stocks, as tracked by the Russell 2000, are down over 25% from their peak — deep in bear market territory. Mid caps, represented by the Russell Midcap Index, are down nearly 20%. Despite the sell-off, investor interest is rising.

Why?

• Inflation and interest rate pressures are easing — both major headwinds

• These companies are now cheaper relative to large stocks than they’ve been in years.

• Valuation risk is lower. As one fund manager put it, falling further now is more like scraping your knees than falling out a window.

Still, selectivity matters. Economic uncertainty and recession fears persist. That’s why some investors are shifting toward the mid for a steadier path. They tend to have more reliable earnings, stronger management, and more durable business models than the small, yet still offer meaningful growth potential.

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Allocation Ideas:

• Consider a core position in like DF Dent Midcap Growth or Heartland Mid Cap Value.

• For targeted exposure, look for quality-focused strategies like T. Rowe Price Small-Cap Value or InfraCap Small Cap Income ETF.

• For higher upside and risk, Oberweis Micro-Cap Fund holds with standout earnings momentum.

Verdence CIO Megan Horneman emphasizes the long-term case: “If you have a long time horizon, then you should be adding to small.”

A modest allocation — say, 3% of a diversified portfolio — can make sense for investors seeking undervalued growth.