Small cap stocks outperformed large caps this quarter, but what's the best bet going forward? Two portfolio managers, Michael Cuggino of Permanent Portfolio Funds, and Bill McVail of Turner Small Growth Fund, shared their market insights. (See their stock picks, below.)
“Larger caps have more resources, diversification, ability to take advantage of worldwide economic growth, and the resumption of that,” Cuggino told CNBC.
“The liquidity issues out there favor large cap stocks—more access to resources to be able to facilitate that growth.”
Cuggino added that the weaker dollar should help corporate earnings of larger cap growth companies based on worldwide growth.
In the meantime, McVail said small cap firms have a significant amount of margin expansion to come. He believes that a new wave in small caps should come as investors buy small cap stocks, instead of just indexes.
“At some point, people are going to have to unwind and buy stocks,” he said.
“Small cap companies that have done a good job hanging in this market environment with limited topline growth are going to have some dramatic margin expansion and earnings acceleration, as you get a bit of topline growth in the back half of this year and the first part of 2010.”
Cuggino Likes:
Hewlett-Packard
State Street Bank
Freeport McMoRan
FedEx
McVail Likes:
J. Crew Group
True Religion
Texas Roadhouse
Green Mountain Coffee Roasters
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Disclosure:
McVail owns shares of JCG, TRLG and TXRH indirectly through his fund.
Cuggino owns shares of HPQ, STT, FCX, FDX indirectly through his fund.
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CNBC Slideshows:
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