Small-cap value mutual funds provide excellent choices for investors looking for bargains, i.e., stocks at a discount with impressive growth potential. Value mutual funds comprise stocks trading at a discount to book value, low price-to-earnings ratios and high dividend yields.
Value investing is a popular strategy, that too for a good reason. After all, who doesn’t want to find stocks with low PEs, solid outlooks and decent dividends? Added to that, small-cap funds are good choices for investors with a high-risk appetite, as companies with small market capitalizations are expected to have higher growth potential than large- and mid-cap companies.
Small-cap funds generally invest in companies having a market cap lower than $2 billion. Also, small-cap funds are expected to provide diversification across different sectors and companies.
Below, we share with you three top-ranked small-cap value mutual funds, viz., Neuberger Berman Genesis Fund NBGNX, Franklin Small Cap Value Fund FRVLX and Bridge Builder Small/Mid Cap Value Fund BBVSX. 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.
Neuberger Berman Genesis Fund seeks long-term capital growth by investing in companies that are still in their early stages of development. NBGNX’s advisors choose to invest in common stocks of small-sized companies, generally below $1.5 billion in market capitalization at the time of initial investment.
Neuberger Berman Genesis Fund has a three-year annualized return of 10.6%. As of February 2023, NBGNX held 105 issues, with 2.7% of its assets invested in Lattice Semiconductor Corp.
Franklin Small Cap Value Fund seeks long-term total return by investing most of its assets in investments of small-capitalization companies. FRVLX also invests in equity securities that its manager believes are currently undervalued and have the potential for significant capital appreciation.
Franklin Small Cap Value Fund has three-year annualized returns of 15.2%. FRVLX has an expense ratio of 0.97% compared with the category average of 1.16%.
Bridge Builder Small/Mid Cap Value Fund invests most of its assets in securities of small and mid-cap companies. BBVSX’s 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 16.7%. G. Menno Vermeulen has been the fund manager of BBVSX since 2016.
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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