With decades of experience investing in small-cap stocks, the team combines both fundamental and quantitative research to build a portfolio of companies that can unlock the power of compounding and deliver investment success over time.
More About This Strategy
- This is a style pure and asset class pure strategy composed only of small-cap companies.
- The team combines a fundamental company ranking with a quantitative ranking to determine stocks to buy or sell from the portfolio.
- The strategy focuses on positions with a high degree of conviction from both fundamental and quantitative research.
AB’s Small Cap Growth Strategy is available in a mutual fund for use in Retirement Plans.
Catching Stardust: Finding Smaller Stocks that Can Shine
November 11, 2020 / 4 min read
Bruce Aronow, James MacGregor, Samantha Lau, Erik Turenchalk
Smaller stocks offer diversification benefits and investment opportunities that can’t be found in their larger brethren. But because large-cap stocks have been so popular for the last 10 years, many investors have missed out on the compelling stories and advantages smaller companies can provide.
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The Morningstar RatingTM for funds, or star rating, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. The star rating is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10.0% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35.0% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10.0% receive 1 star. The Overall Morningstar RatingTM for a managed product is derived from a weighted average of the performance figures associated with its three-, five- and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36–59 months of total returns, 60% five-year rating/40% three-year rating for 60–119 months of total returns and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
Risks To Consider
Market Risk: The market values of the portfolio’s holdings rise and fall from day to day, so investments may lose value.
Foreign (Non-US) Risk: Non-US securities may be more volatile because of political, regulatory, market and economic uncertainties associated with such securities. Fluctuations in currency exchange rates may negatively affect the value of the investment or reduce returns. These risks are magnified in emerging or developing markets.
Capitalization Size Risk (Small/Mid): Small- and mid-cap stocks are often more volatile than large-cap stocks?smaller companies generally face higher risks due to their limited product lines, markets and financial resources.
Derivatives Risk: Investing in derivative instruments such as options, futures, forwards or swaps can be riskier than traditional investments, and may be more volatile, especially in a down market.
Investors should consider the investment objectives, risks, charges and expenses of the Fund/Portfolio carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit our Literature Center or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.