Small-cap funds are good choices for investors seeking diversification across different sectors and companies. Investors with a high-risk appetite should invest in these funds. Small-cap funds generally invest in companies having a market cap of less than $2 billion. The companies, smaller in size, offer growth potential and their market capitalization may increase subsequently.
Meanwhile, value stocks tend to trade at a price lower than their fundamentals (i.e., earnings, book value, debt-equity). It is common to invest in value funds for income or yield. However, not all value funds are made up solely of companies that primarily use their earnings to pay dividends. Investors interested in choosing value funds for yield should check the mutual fund yield, i.e., dividend payments divided by the value of the mutual fund’s shares.
Below, we share with you three top-ranked small-cap value mutual funds, viz., Invesco Small Cap Value Fund VSCAX, Bridge Builder Small/Mid Cap Value Fund BBVSX and Sterling Capital Behavioral Small Cap Value Equity Fund SPSAX. Each has a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of Small Cap Value mutual funds.
Invesco Small Cap Value Fund seeks capital appreciation by investing in a diversified portfolio of equity securities of small-capitalization companies that the fund’s investment adviser believes are undervalued. VSCAX advisors also invest in securities of foreign issuers and convertible securities that are below investment-grade quality.
Invesco Small Cap Value Fund has a three-year annualized return of 33.2%. As of April 2023, VSCAX held 97 issues, with 3% of its assets invested in Western Alliance Bancorporation.
Bridge Builder Small/Mid Cap Value Fund invests the majority of its assets in securities of small and mid-cap companies. BBVSX advisors also invest in securities issued by U.S. and foreign entities.
Bridge Builder Small/Mid Cap Value Fund has a three-year annualized return of 16.9%. BBVSX has an expense ratio of 0.40% compared with the category average of 1.01%.
Sterling Capital Behavioral Small Cap Value Equity Fund seeks long-term capital growth. SPSAX invests most of its assets in large-cap companies that the portfolio managers believe offer potential for superior long-term growth.
Sterling Capital Behavioral Small Cap Value Equity Fund has three-year annualized returns of 20.1%. Robert O. Weller has been the fund manager of SPSAX since 2013.
To view the Zacks Rank and the past performance of all small-cap value mutual funds, investors can click here to see the complete list of small-cap value mutual funds.
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