Where to Invest Now: Small vs. Large Caps
Concerns about instability in Europe have been steering some investors away from large-cap multinationals and towards small caps. So far this year, the small caps have outperformed their larger counterparts. So which way should investors bet? Bill McVail, portfolio manager at Turner Small Cap Growth Fund, and Jack Ablin, executive vice president and chief investment officer of Harris Private Bank, discussed their views. (See McVail's Stock Picks, below.)
“We can go in any market, but the argument is that the large-cap companies have pushed their small-cap suppliers to cut prices last year, and we saw that in earnings,” Ablin told CNBC.
Ablin said that large-cap stocks are cheaper than small caps and the earnings outlook also favors large caps. In particular, he likes consumer discretionary, technology and material sectors.
“I would rather err on the side of the larger blue chips that didn’t participate last year, have a fair degree of pricing power, and can largely hold their small-cap suppliers at bay,” he said.
In the meantime, McVail explained why he sees better opportunities for investors in the smaller names.
“It’s been a tougher period for small caps,” he said. “But small cap stocks are not worried about sovereign debt, Greece, and what’s going on in Europe—they focus on the here and the now.”
Green Mountain Coffee
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CNBC Data Pages:
McVail owns shares of GSCI and TRLG in his fund, but does not own either personally.
McVail does not own shares of GMCR personally or in his fund.
No immediate information was available for Ablin or his firm.