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Posted by on Jun 30, 2017 in Cornerstone Investment Partners, Featured, Small Cap Market Review

Weekly Small Cap Market Review: June 19 – June 23

Weekly Small Cap Market Review: June 19 – June 23

By Mark Spatt, CFA, Investment Analyst at Cornerstone Investment Partners, sub-advisor of the AdvisorShares Cornerstone Small Cap ETF (NYSE Arca: SCAP)

I’m sure I’m not the only one who watched House of Cards over the past few weeks. The show that really put streaming TV content on the map continues to be a big driver of traffic for its website. It’s gotten crazier over time, and this season (don’t worry, no spoilers) perhaps went overboard once or twice. Maybe it’s because it’s less fun to watch someone work to keep power than it is to watch them work to achieve it, or maybe it’s because Mahershala Ali is now too famous to make another appearance as secondary character Remy Danton. But one reason is because there’s just more competition. Not only on its own site (whose owner is spending over $6 billion a year on content), but other streaming networks and traditional television and cable as well.

Unlike linear ad-supported networks, which are driven by lots of decent content throughout the schedule, the streaming and premium subscription models  are driven by a few breakout shows that singlehandedly justify the consumer ponying up money each month (in academic circles, it’s called resonant marketing). In another context, it’s the choice between Budweiser and Wicked Weed’s “Freak of Nature” (ironically, now owned by the same company). Budweiser is set up to sell lots of beer to lots of people who want “beer,” somewhat independent of whether that beer is Bud or Coors or Miller, while Wicked Weed sells fewer bottles at a much higher cost to people who really want “Freak of Nature.” So if Wicked Weed needs to sell a lot of beer, they need a wide selection, each made for a particular buyer. Thus, Wicked Weed sells over 40 beers just at its two locations in beautiful Asheville, NC, and streaming/subscription services have to keep developing one-off content for viewers. So don’t worry that your favorite 90s show might not be remade after the “Full House” and “Gilmore Girls” reunions.

The small cap market, as defined by the Russell 2000 Index, was up 0.6% overall during the week. There were no particular key news items during the week as recent macro trends (yields, commodities) continued to weigh on relevant equities, while remaining supportive of the market as a whole. Health Care (+7.5%, with biotechs driving the run on speculation that regulation will soften), Information Technology (+2.6%), and Materials (+0.5%) were the strongest sectors in the Index. Energy (-3.1%, as WTI crude oil dropped over 4% to enter a bear market on continued supply-side concerns), Financials (-2.8%, as long-term yields were down and further flattening of the yield curve), and Telecommunication Services (-2.4%) were the weakest. Overall, small caps outperformed large caps as the Russell 2000 Index returned around 35 basis points more than the Russell 1000 Index (up 0.2%). Among small caps, growth significantly outperformed value, with the Russell 2000 Growth Index beating the Russell 2000 Value Index by 280 basis points, driven by growth-exposed Health Care and Information Technology strength combined with value-exposed Energy and Financials weakness.

 

The information, statements, views, and opinions included in this publication are based on sources (both internal and external sources) considered to be reliable, but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. Such information, statements, views and opinions are expressed as of the date of publication, are subject to change without further notice and do not constitute a solicitation for the purchase or sale of any investment referenced in the publication.

The AlphaBaskets blog provides frequent market insight and commentary by AdvisorShares Investments, LLC, created by AdvisorShares and other leading active managers.  AdvisorShares Investments is an SEC-registered investment adviser and the investment adviser to the AdvisorShares actively managed ETFs. The views expressed on AlphaBaskets should not be taken as investment advice or a recommendation for any of the actively managed ETFs advised by AdvisorShares.

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