Like Mr. Daniels, Mark Zavanelli, president and head portfolio manager at Orange City, Fla.-based ZPR Investment Management Inc., described the 12 months ended June 30 as a "tale of two periods."
"What was doing well in the second half of 2016 (microcap stocks, value stocks, and small financials), was not doing as well in the first half of 2017," Mr. Zavanelli said.
"In late 2016, expectations for U.S. growth and what the (Trump) administration was going to do really boosted interest rates strongly," Mr. Zavanelli said. In the first half of 2017, however, interest rates have fallen as growth expectations for the U.S. have trailed off, and the Trump administration's tax reform and infrastructure plans have not really materialized, he said.
ZPR's volume value strategy ranked second in the year ended June 30 with a gross return of 55.79%, down one spot from last quarter. For the five years ended June 30, the strategy ranked third with an annualized gross return of 25.09%, down two spots from the previous quarter. All five-year returns are annualized.
Mr. Zavanelli said the portfolio team looks for microcap stocks with attractive valuations and low trading volume relative to their total shares outstanding.
The combination of those factors — microcap, value and low trading volume — worked well for the strategy over the last year, Mr. Zavanelli said.
The portfolio also continues to have a more than 60% weighting to small financials. Those stocks had a "terrific fourth quarter of 2016," Mr. Zavanelli said.
Occupying the No. 1 spot for the 12 months ended June 30 was Schneider Capital Management Corp.'s small-cap value strategy with a gross return of 56.65%.
Arnold C. Schneider III, president and chief investment officer, said the Wayne, Pa.-based firm is a deep value manager that invests in cheap stocks where the firm sees a chance for improved fundamentals.
According to Mr. Schneider, four sectors — banks, materials, producers and cyclical technology — contributed to the strategy's success over the year ended June 30.
Banks rebounded after Donald Trump's election and KeyCorp. and Regions Financial Corp. stood out as winners, Mr. Schneider said. In materials, Chemours Co., a leading producer of titanium dioxide, was a top contributor, and in producers, so was industrial distributor DXP Enterprises Inc.
Occupying third place on the one-year list was Zevenbergen Capital Investments LLC's Z/Tech strategy with a gross return of 53.28%. The strategy also ranked first on the five-year list with a gross return of 26.27%.
Z/Tech is a concentrated growth portfolio of about 25 companies, said Brooke de Boutray, portfolio manager and managing director at the Seattle-based firm. It is considered a large-cap strategy by Morningstar.
The portfolio team looks for companies with founder-led, visionary management that are often disrupting industries, Ms. de Boutray said.
There's been "so much change and disruption" in the way people shop, consume entertainment, prepare meals or buy a home, Ms. de Boutray said.
Winners over the past year included Tesla Inc., Netflix Inc., Nvidia Corp., MercadoLibre Inc., and Wayfair Inc.
Behind Zevenbergen on the one-year list was Bares Capital Management Inc.'s small-cap strategy with a gross return of 50.99%, up one spot from last quarter.
Brian T. Bares, founder and research analyst at the Austin-based firm, said the portfolio team takes a qualitative approach to build a concentrated portfolio of eight to 12 stocks. Eleven research analysts meet with companies' management teams, attend trade shows and walk factory floors, he said.
Standouts over the year included Interactive Intelligence Group Inc., which was acquired in 2016; Colefax Group PLC and Platform Specialty Products Corp., which benefited from a post-election rebound in industrials; and technology names Alarm.com and Box Inc.
Rounding out the top five on the one-year list was Pacific Ridge Capital Partners LLC's microcap value strategy with a gross return of 47.1%. The strategy also ranked fourth on the five-year list with a gross return of 21.9%.
Mark Cooper, president and co-senior portfolio manager, said that the Portland, Ore.-based firm is a fundamental, bottom-up stock picker that invests in out-of-favor companies.
Standouts over the last year included shipping container leasing company CAI International Inc., which benefited from rising steel prices and dissipating bankruptcy concerns for some shipping companies, Mr. Cooper said. Ultra Clean Technologies Corp., a semiconductor capital equipment company, was another standout over the one-year period.
The remaining strategies of the top five on the five-year list was Naylor & Co.'s core composite midcap growth strategy, in second place with a gross return of 25.31%, and Wellington Management Co. LLP's Global Technology Opportunities with a gross return of 21.62%, ranking fifth. Both strategies were on last quarter's five-year list.
The median return for the overall domestic equity universe for the five years ended June 30 was 14.32%.
Among domestic collective investment trusts, The Boston Co. Asset Management LLC's small-cap opportunistic value equity strategy ranked first on the one-year list with a net return of 31.48%, followed by J.P. Morgan Asset Management's U.S. active value fund, 29.84%; State Street Global Advisors' Nasdaq-100 index strategy, 29.35%; American Century Investments' U.S. small-cap value equity trust, 28.85%; and Harris Associates LP's Oakmark collective fund, 28.54%. The median return for domestic collective investment trusts for the Boston Co. Asset Management LLC's small-cap opportunistic value equity strategy ranked first on the one-year list with a net return of 31.48%, followed by J.P. Morgan Asset Management's U.S. active value fund, 29.84%; State Street Global Advisors' Nasdaq-100 index strategy, 29.35%; American Century Investments' U.S. small-cap value equity trust, 28.85%; and Harris Associates LP's Oakmark collective fund, 28.54%. The median return for domestic collective investment trusts for the year ended June 30 was 18.66%.
For the five years ended June 30, the highest-returning CIT was State Street Global Advisors' Nasdaq-100 index strategy, with a net return of 18.15%, followed by J.P. Morgan's growth advantage strategy, 18.01%; BNY Mellon Investment Management's EB DV dynamic U.S. equity strategy, 17.93%; J.P. Morgan's U.S. active value fund, 17.62%; and Amalgamated Bank's Longview quantitative midcap fund, 17.23%.
The median return for domestic collective investment trusts over the five-year period was 14.57%.
All data for Pensions & Investments' top-performing managers report are provided from Morningstar's global separate account/collective investment trust database. The data for the rankings on which this story is based were pulled Aug. 3.
