October showed a glimmer of hope in the form of a rally that then faded in November, with the sovereign debt crisis in Europe overshadowing a strong third-quarter earnings season and improving domestic economic data. Unsurprisingly, Europe is falling into a recession that is starting to depress global economic activity. Financial markets remain at the mercy of high volatility as fear of further fallout to the global economy and markets remains center stage. The Russell 2000 declined precipitously during much of November only to rebound in its last several days. As this year comes to a close, investors will most likely look back at 2011 and remember its striking macro headlines and continued high correlation. We, however, will remember 2011 for the valuation opportunities that were created and investors' pronounced lack of appetite for risk.
From our perspective, the small-cap environment is fraught with opportunities. Today's attractive absolute valuations are an opening to find bargains that will drive results for the next three to five years. It is easy to forget in the daily barrage of dismal macro news, extreme volatility, and high correlation that in these uncertain times, active managers have the ability to find real assets with solid balance sheets and attractive absolute valuations.
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From our perspective, the small-cap environment is fraught with opportunities. Today's attractive absolute valuations are an opening to find bargains that will drive results for the next three to five years. It is easy to forget in the daily barrage of dismal macro news, extreme volatility, and high correlation that in these uncertain times, active managers have the ability to find real assets with solid balance sheets and attractive absolute valuations.
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Read the complete article
