Monday, October 10, 2005

Small cap rally still has more life, says Lisanti

The small cap stock rally is NOT over, according to the presentation made by Mary Lisanti, president and portfolio manager, AH Lisanti Capital Growth LLC, at the Northeast NAPFA conference on October 8, 2005.

Small caps' outperformance cycles tend to be very, very long and driven by earnings growth, said Lisanti. She estimates that the current cycle will last 10 years, so it's only about halfway completed.

Other positive factors cited by Lisanti include:

o Small caps' return on capital is rising.

o The economy is slowing, but slowing will be uneven, so some small cap companies -- especially small cap growth companies -- will prosper.

o Small caps outperform during periods of inflation because they have pricing power. Also, their cost structures are better than those of large caps. Unlike larger companies, they are less international and have fewer embedded costs and less debt.

o Small cap growth has done much worse than large cap growth, so reversion to mean should help small cap growth even more.

To learn more about Lisanti, go to http://www.ahlisanti.com/.

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8:46 AM  

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