February 10, 2014

CONSUELO MACK: This week on WealthTrack, they say the best things come in small packages but Great Investor Charlie Dreifus says the time to think big is now. The noted the small company stock manager explains why he has closed his small cap fund to new investors and has opened to large caps in his Royce Special Equity Multi-Cap Fund. A rare interview with Charlie Dreifus is next on Consuelo Mack WealthTrack.


Hello and welcome to this edition of WealthTrack, I’m Consuelo Mack. They say the best things come in small packages and that has certainly been the case in the stock market in recent years. Looking over the last decade for instance, small company stocks have outperformed large company ones by a significant margin delivering 10.4 % annualized returns versus 7.1% annualized returns for large cap ones. Last year the performance gap was also huge. The Russell 2000 Index, considered the benchmark for small stocks advanced 38.8% whereas the widely followed S&P 500 lagged with a 32.4% return. And not only that, by several measures of value including price/earnings multiples, small stocks look expensive. Five years from the market’s 2009 bottom and clearly in a bull market where are the best stock bargains to be found? That is a question value investors ask themselves every day. However few portfolio managers are interested or able to stray from their area of focus or expertise.


This week’s guest is an exception in both desire and ability. Three years ago he made a decision to expand his long-time concentration in small company stocks to include large ones as well.

He is Great Investor Charlie Dreifus who for the last 16 years has made his name managing the Royce Special Equity Fund, which is a value oriented small and micro-cap fund that has beaten its benchmark the Russell 2000 index since inception with less than market volatility. In 2010 Dreifus launched another value oriented fund, but this one was not in small caps and never will be. It is the Royce Special Equity Multi-Cap Fund and it is emphasizing large cap stocks right now. It has also beaten its benchmark, the Russell 1000 since its inception three years ago.


Why did Dreifus want to go big and how did he convince his boss, legendary small cap pioneer and fund manager Chuck Royce to let him do it? Dreifus says although he was managing small he always kept an eye on the big boys.

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