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Small Caps' Big Problem Now: 5-Star Manager

Small caps have risen 70 percent from their March lows, but Eric Cinnamond, senior portfolio manager at Intrepid Capital Funds' 5-star small-cap fund, said it's been harder to find good companies at discounted prices.

While higher-risk, more cyclical companies were attractive in late 2008 and early 2009 — with many small-caps being sold at 50 percent discounts compared to their worth — this trend has reversed, he said.

"Currently, our newer ideas are closer to 15 to 20 percent discounts and they're more steady types of businesses," he said. "We think some of the cyclical companies right now are pricing in 2007 type of margins that, really, we don't believe will return in the near future."

Intrepid is specifically targeting companies with strong balance sheets and free cash flows, Cinnamond said.

Cinnamond's Fund Owns:

Prestige Brands

Core Mark

Constellation Brands

Weis Markets

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Disclosures:

Disclosure information was not available for Cinnamond or his company.

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