Small-cap value mutual funds are an excellent choice for investors on the lookout for a bargain, i.e., stocks at a discount, with impressive growth potential. Value mutual funds are those that invest in stocks trading at a discount to book value, have low price-to-earnings ratio and high dividend yields. Value investing has always been a popular strategy, and for a good reason.
Investors with a high risk appetite also find small-cap funds intriguing as small-market capitalization has a higher growth potential than large or mid-cap companies. Small-cap funds generally invest in companies with a market cap below $2 billion. Also, small-cap funds are expected to provide diversification across sectors and companies.
Below we share with you three top-ranked, small-cap value mutual funds. Each has a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform peers in the near future. Investors can click here to see the complete list of all small-cap value mutual funds, their Zacks Rank and past performance.
Bridgeway Small-Cap Value (BRSVX – Free Report) maintains a diversified portfolio by investing in securities of small-cap companies listed on the NYSE, NYSE MKT and NASDAQ. BRSVX seeks total returns mainly through growth of capital. The fund invests a bulk of its assets in undervalued small-cap stocks. Bridgeway Small-Cap Value has one-year annualized returns of 8.8%.
BRSVX has an expense ratio of 0.94% compared with the category average of 1.38%.
DFA US Targeted Value R2 (DFTPX – Free Report) seeks appreciation of capital for the long run. DFTPX invests in a wide variety of readily marketable securities of domestic mid- and small-cap companies that are expected to be value stocks. DFA US Targeted Value R2 has returned 8.2% in the past year.
As of April 2018, DFTPX held 1,468 issues, with 0.88% of its assets invested in HollyFrontier Corp.
Prudential QMA Small-Cap Value Retirement (TSVRX – Free Report) seeks above-average growth of capital. TSVRX invests a large chunk of its assets in equity securities of small-cap companies. The fund invests primarily in companies whose market-cap falls within the range of the S&P SmallCap 600 Index or the Russell 2000 Index. TSVRX not only invests in U.S. equity securities and REITs but also in common stocks of non-U.S. companies. Prudential QMA Small-Cap Value Retirement has returned 1.7% over a year.
Mitchell B. Stern is one of the fund managers of TSVRX since 2015.
To view the Zacks Rank and past performance of all small-cap value mutual funds, investors can click here to see the complete list of funds.
Want key mutual fund info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>