This "No-Brainer" Buy Delivered 82%

Has this buying opportunity run its course? [Wealthy Retirement]( SPONSORED [Author of Get Rich with Dividends Is Giving Away His Ultimate Dividend Package FOR FREE!]( [Click Here to Get Marc Lichtenfeld's Ultimate Dividend Package]( Including Details on His #1 Dividend Stock... the Safest 8% Dividend in the World... the Top Three "Extreme Dividend" Stocks... and Much, Much More. [For Free.]( [MARKET TRENDS]( Can Small Caps Sustain Their Incredible Rally? Mable Buchanan, Managing Editor, The Oxford Club [Marc Lichtenfeld] It isn't often that you encounter a "no-brainer" buying opportunity... But Contributing Analyst Jody Chudley uncovered one last April - and recently, I checked back in with him to find out whether one high-flying sector still has room left to run. On April 14 of last year, Jody [wrote]( "There has rarely been a better time to buy small cap stocks." On the tail of a horrific first quarter, [small cap stocks]( - represented by the Russell 2000 Index - were down nearly 31%, the largest quarterly loss in the index's history. But given the spectacular recoveries these stocks posted following bottoms in 2002 and 2009, Jody was confident the Russell 2000 posed a remarkable buying opportunity. One year later, the market has proven Jody right... [The Russell 2000 Index Rallies]( Investors who got in on the Russell 2000 immediately following Jody's bullish call are up a staggering 82%. Investors in midcaps and large caps, measured by the Fidelity Mid Cap Index Fund and the Fidelity ZERO Large Cap Index Fund, trail behind with gains of 66% and 57% from the same period, respectively. Small caps are known for their ability to make outsized moves compared with those of the broader market, a phenomenon known as the "small cap premium." This is because small caps are more sensitive to economic change than their larger cousins. For example, take the iShares Russell 2000 ETF (NYSE: IWM), one of the funds Jody suggested for playing this trend in small caps. It has a [beta]( of 1.27, meaning that it is 1.27 times more volatile than the S&P 500 - and therefore 27% more likely to move based on macro events. But even without the help of a recovering economy, several variables, like strong management, [inflation expectations]( and even discounted valuations, have helped small caps prosper in a difficult business environment. While small cap stocks' sales took a bigger hit as a result of COVID-19, these companies did a much better job of cutting costs than larger companies, a feat reflected in higher earnings per share estimates. Additionally, their lower debt levels make them less susceptible to interest rate changes, while their smaller size means that stimulus funds have a more pronounced effect. But most notably, small caps tend to outperform during periods of increased inflation. According to the CME Group, the ratio of the Russell 2000 to the S&P 500 has tracked along with inflation expectations for more than a decade. [The Russell 200-S&P 500 Ratio Tracks Along with Inflation]( Some experts even believe that small caps' lower price-to-book ratios, in making them more akin to value stocks than growth stocks, also position them to benefit from the market's shift out of growth and into value. SPONSORED [He's got an 83% win rate...]( [TPU 85]( And he's guaranteeing he beats it over the next year! [You won't believe it until you see how it works so well.]( This places small cap stocks at the center of various tailwinds striking the market and fueling growth. But can the outperformance continue? This March, market heavyweight Morgan Stanley downgraded small caps, doubtful that they could maintain their rally amid a reopening economy and fears about COVID-19 variants. But I wanted to hear from Wealthy Retirement's resident expert on market trends... Jody wrote in a recent note... This has been an incredible trade. The bad news is that when an entire sector of stocks has this big of a move, the value proposition that it offers changes. While stock prices have nearly doubled, earnings for the entire sector most definitely have not. That means valuations for small caps have become a lot more expensive. The Russell 2000 Index now trades at more than 30 times estimated earnings, which is 25% higher than it has been on average since 2007. For better perspective, consider that as of today, the Russell 2000 has been more expensive only 8% of the time since 2007. Last spring, the small cap sector represented an incredible bargain. Today, it does not. There are still bargains to be found, for sure, but the average small cap is no longer attractively valued. ([Read Jody's most recent articles here.]( Space is filling up on the small cap bandwagon, and these stocks are no longer the "no-brainer" buy that they were last April. If you followed Jody's lead and explored small caps last spring, now may be a good time to take profits. It will take more digging to find undervalued opportunities that still pose strong profit potential. But when one door closes in the markets, another one always opens... And if you think small caps had the potential to soar, wait until you see [this](. The secret to success in today's market may be to think even smaller. Alexander Green, Chief Investment Strategist at our sister e-letter Liberty Through Wealth, has seen the proof. Right now, he's got his eye on a tiny tech stock - a microcap - trading for just $4 a share. This stock is growing more than Apple (Nasdaq: AAPL) was when it released the iPhone... and it's nailed down 32 patents on a disruptive technology that could change everything. [Click here to learn more.]( Good investing, Mable [Leave a Comment]( MORE FROM WEALTHY RETIREMENT [Don't Get Burned by This Company's Deceptive Market Valuation]( [A High-Yield Dividend With an Electric Track Record]( [Founder-Led Companies Outperform the Market Average]( [Facebook]( [Facebook]( [Twitter]( [Twitter]( [Email Share](mailto:?subject=A%20great%20piece%20from%20Wealthy%20Retirement...&body=From%20Wealthy%20Retirement:%0D%0A%0D%0A Has%20this%20buying%20opportunity%20run%20its%20course? %0D%0A%0D [Email Share](mailto:?subject=A%20great%20piece%20from%20Wealthy%20Retirement...&body=From%20Wealthy%20Retirement:%0D%0A%0D%0A Has%20this%20buying%20opportunity%20run%20its%20course? %0D%0A%0D [Email Share]( [Push Alert]( SPONSORED [The Best 5G Stock to Buy Under $20]( [3D render CPU Technology]( With stocks hitting all-time highs virtually every day, it's hard to find a good bargain. But this 5G stock is an exception. 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