The US equity market had a great run in 2017 and with tax cuts recently passed in the US, it’s looking like the surge will continue.
The Russell 2000 Index was up 18.58% over 2017, slightly lagging the S&P 500, which returned 24.6% in the 12 months ending on December 30, but there are still opportunities for great outperformance and possibly better value for money.
The average manager in the small and medium company space underperformed, returning 17.5%. In this analysis we picked out the three best performing managers that have outperformed the Citywire-assigned Russell 2000 benchmark over the past 12 months. Interestingly enough, the three best performers were looking at the smaller end of the market.
3. Drew Beja - Granahan Investment Management
- Fund: Granahan US Focused Growth
- 12-month performance: 33.6%
Starting off our top three is Drew Beja from Granahan Investment Management, a Massachusetts-based firm that specializes in smaller cap equity investing. A 30-year industry veteran, Beja launched his focused growth strategy in 2007 while with Boston-based Lee Munder Capital Group. The Citywire + rated manager brought the fund with him when he joined Granahan in 2011.
Beja’s US Focused Growth fund mirrors its $526 million US-based Small Cap Focused Growth Product.
As part of its strategy, the fund focuses on smaller companies poised to grow at 15% or more.
The high conviction strategy invests 60% to 80% of its portfolio in the top 15 holdings of around 50 selected stocks. Its top holding, as of December 2017, was CoStar, a commercial real estate information company, which made up 7% of the portfolio followed by 2U, at 6.5%, an education technology companies that works with online degree programs.
2. Eytan Shapiro and Timothy Parton - JP Morgan Asset Management
Next on the list is Citywire AA-rated Eytan Shapiro and + rated Timothy Parton. The duo have been working together for over 17 years.
Shapiro has been managing the US Smaller Companies fund since 1994 with Parton joining him in 2000. They have a shorter track record together on the US Small Cap Growth fund, having pared up in 2014.
Together the funds amount to over $308 million in assets under management. The top two holdings are the same for both portfolios. One is a technology company that focuses on food processing and air transportation, John Bean Technologies, and the second is gaming and hospitality company Boyd Gaming.
1. Todd Beiley - Kayne Anderson Rudnick Investment Management
Funds:Virtus GF US Small Cap
12-month performance: 45%
Coming in at the top is Citywire AAA-rated Todd Beiley, manager of Virtus’s US Small Cap fund. Beiley has been with Los Angeles-based Kayne Anderson Rudnick since 2002 and started managing the Virtus distributed Ucits fund in December 2014.
Beiley’s high conviction strategy seeks to identify high quality companies that dominate their market, have excellent managers, strong balance sheets and show consistent growth. As of the end of November 2017, the portfolio had 18 holdings.
The top holding, which makes up 9.9% of the $13 million fund, is gourmet foods and restaurant supply Chef’s Warehouse. Low-cost online trading platform Interactive Brokers is also one of the fund’s top holdings, with 9.6% allocated to it.