Hope is shining a light on small-cap value investing, according to an investment manager that has ridden out the troublesome year.
"We may be coming into a Fed easing mode because the whole realm of (small-cap) thinking has changed," said Lawrence Baumgartner, president and founder of Broad Street Asset Management, a small- and midcap equity management firm in Columbus, Ohio.
Anticipation is replacing discouragement.
This summer, when he watched the movie Armageddon, Mr. Baumgartner said it reminded him of the small-cap value world. The film depicts an asteroid hurling toward Earth, projecting large rock fragments.
"If you've been a small-cap manager, torpedos have been coming in from everywhere. There were earnings disappointments and stocks dropping. It felt like a war going on, like the world was coming to an end and there was nowhere to hide," he said.
But that may change soon if the Federal Reserve Board drops the discount rate, as some managers expect.
"I think it will be October or November, but whenever the psychology turns from Fed tightening to Fed easing, it will get small-cap moving," he said.
Broad Street manages about $230 million in the Armada Funds Small Cap Value mutual fund, which includes some small institutional investors.