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More Equity Choices Adds Value

In order to meet the growth and diversification needs of equity investors, James investment research offers a range of equity investment styles. We understand that clients have different needs and risk tolerances, and this is why we've created more investment choices. By utilizing these styles either independently or in a customized blend, we can help clients reach their financial goals. Why Small-cap Stocks?

It makes sense not only to diversify across asset classes by owning both stocks and bonds, but also to diversify within your stock portfolio by owning small companies as well as large ones. If you're looking for opportunities for higher returns on your investments, consider small-cap stocks for at least a portion of your portfolio. These small issues, which we traditionally define as companies having $500 million - $2.0 billion in market capitalization - have historically provided higher returns than large stocks. In studies by the market historians - Ibbottson and Associates, going back 25 years small stocks have outperformed larger stocks in all time periods five years and longer.

The Ups and Downs of Small Stocks

As you might expect, these higher returns come at a price - greater volatility. In the past 25 years, small stocks have been subject to greater ups and downs than large stocks. In fact, generally small stocks have fallen more than larger stocks in periods where the market (S&P 500 Index) has fallen.

Small Cap Value

However, history teaches us that for the long-term investor, there's potential for great rewards when including small-cap stocks as part of an overall investment strategy. In fact, over the history of the stock market, small stocks have outperformed large stocks on average by four percent on an annual basis. However, you may think that the risks associated with small-cap investing are too daunting. The key question is: How can investors achieve greater returns with acceptable levels of risk? The answer: by following a disciplined research approach.

James Investment Research has built a successful record in managing small stock portfolios by following a disciplined value approach to investing. We use fundamental analysis as well as our vast computer resources, to search for the top small companies. Our proprietary model is a tremendous tool in our search for small-cap stocks. Our model provides us a database of over 8,000 stocks to identify those with the strongest combination of value, neglect and management confidence traits. We then select from the best ranked stocks that meet our small-cap definition.

Conversely, stocks are sold from the portfolio if they substantially deteriorate in our ranking system, are no longer undervalued or grow above our small-cap size definition.

To put our theories to the test, James Researchers have conducted a ten-year simulation which specifically measured the performance of small-cap value stocks selected by our screens. In the simulation, James' stocks outperformed The Russell 2000 Small-cap Index (the market bellwether measure for these stocks) with less risk as measured by standard deviation. (to receive a copy of this simulation, please contact us.)
JIR Outlook

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