BUZZ-Analysts get optimistic on small caps for 2016

Mon Nov 30, 2015 10:59am EST
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** Russell 2000 index, up 3.5 pct for November, set to easily outpace the S&P 500 which up 0.3 pct

** RBC's chief equity strategist Jonathan Golub notes small caps have delivered a 272 pct total return vs 218 pct for large caps since market low

** Golub says small caps expected to deliver faster relative earnings growth over next year (14 pct vs 6.8 pct) while trading at a slight premium, making small names attractive on PEG basis

** S&P Capital IQ analyst Todd Rosenbluth lists the iShares Core S&P SmallCap ETF as its Focus ETF for December, with an overweight rating

** The ETF tracks the S&P SmallCap 600 and Rosenbluth believes small caps will see above-average earnings growth in 2016

** Rosenbluth notes P/E growth rate for small caps of 1.3 times is a discount to 1.6 times for mid caps and 1.5 times for S&P 500

** Small caps more weighted towards financials and industrials but less to technology and consumer staples than S&P 500, and more domestically focused

** Consumer discretionary has a weighting of 13 pct in both indices, but S&P Capital IQ projects much stronger earnings growth for small cap discretionary names in both 2015 and 2016

** Recent rally in small-caps means the S&P small-cap 600 has nudged ahead of the S&P500 on YTD returns. Chart: (Reuters Messaging: