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Small vs. Large Caps—Portfolio Managers' 2011 Strategies

Small-cap stocks have outperformed the large caps this year: The Russell 2000 index up about 20 percent, versus the S&P 500, which rose almost 10 percent. Which is the better buy going into 2011? Jerry Jordan, portfolio manager at Jordan Opportunity Fund, and Bill McVail, portfolio manager at Turner Small Cap Growth Fund, shared their perspectives and best plays.

The Large-Cap Case:

“Small-cap relative performance is at an almost 20 year high, and that’s an incredibly long period of time for one asset class to run,” Jordan told CNBC.

“And as we get into next year, we’re going to have an opportunity for large-cap companies to start raising dividends, now that we know what the tax policy looks like.”

In addition, Jordan said he expects a slower growing global economy next year, which would hinder small-cap stocks.

The Small-Cap Case:

Meanwhile, McVail said small caps still have room to rise.

“We think M&A activity is going to continue into 2011, as these large-cap companies have big cash balances,” he explained.

“They’ll come after the small caps and that’s going to continue to move these stocks higher into 2011.”

Jordan’s Top Holdings:
(as of this writing)

Deere

Walt Disney

Newmont Mining

Sandisk

Mosaic

Jordan’s Top Picks:

Deere

Disney

Sandisk

McVail’s Top Holdings:
(as of this writing)

Warnaco Group

Wesco Intl.

Verifone

Crocs

Riverbed Tech.

McVail’s Top Picks:

Wesco Intl

True Blue

Tempur-Pedic

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Scorecard—What They Said:

  • Jordan's Previous Appearance on CNBC (Aug. 16, 2010)
  • McVail's Previous Appearance on CNBC (May 11, 2010)

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More Market Analysis:

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CNBC Slideshows:

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CNBC Data Pages:

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Disclosures:

McVail does not own shares of TPX, TBI, WRC, WCC, PAY, CROX or RVBD.

Jordan and his family own shares of DE, DIS, SNDK, NEM and MOS.

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Disclaimer