Small-company stocks have been hot of late, but Parnassus Small-Cap Fund (symbol PARSX) has been even hotter. Over the past three years, Parnassus has beaten its category by an average of more than nine percentage points per year. Veteran manager Jerome Dodson has done so by investing in small but strong companies that sell at value prices and meet his social screens.
Dodson begins by trying to determine the business value of a company, or what the business is worth regardless of the stock price. If the stock's market capitalization (price times shares outstanding) is one-third or more below his estimate of the company's value, he'll consider adding it to the fund. But a cheap stock isn't a value unless the company's businesses are strong. So Dodson looks for firms that have sustainable competitive advantages and strong balance sheets, with low debt and a lot of cash.
Strength also comes from being socially responsible, he believes. He says that if a company respects the environment and its employees, it's less likely to be fined, face lawsuits or practice sketchy accounting.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Although small-company stocks have historically delivered higher returns than their large-firm brethren, they tend to be more volatile. Thanks to his conservative strategy, Dodson has a history of limiting losses during bear markets (Small-Cap lost 25% in 2008, compared with a 34% loss for the Russell 2000 index) but lagging during strong markets. The past year's strong results have been a pleasant exception.
-
Stock Market Today: Stocks Rally Despite Rising Geopolitical TensionThe main indexes were mixed on Tuesday but closed well off their lows after an early flight to safety.
-
What's at Stake for Alphabet as DOJ Eyes Google's ChromeAlphabet is higher Tuesday even as antitrust officials at the DOJ support forcing Google to sell its popular web browser. Here's what you need to know.
-
Best Banks for High-Net-Worth Clients 2024wealth management These banks welcome customers who keep high balances in deposit and investment accounts, showering them with fee breaks and access to financial-planning services.
-
Stock Market Holidays in 2024: NYSE, NASDAQ and Wall Street HolidaysMarkets When are the stock market holidays? Here, we look at which days the NYSE, Nasdaq and bond markets are off in 2024.
-
Stock Market Trading Hours: What Time Is the Stock Market Open Today?Markets When does the market open? While the stock market does have regular hours, trading doesn't necessarily stop when the major exchanges close.
-
Bogleheads Stay the CourseBears and market volatility don’t scare these die-hard Vanguard investors.
-
The Current I-Bond Rate Until May Is Mildly Attractive. Here's Why.Investing for Income The current I-bond rate is active until November 2024 and presents an attractive value, if not as attractive as in the recent past.
-
What Are I-Bonds? Inflation Made Them Popular. What Now?savings bonds Inflation has made Series I savings bonds, known as I-bonds, enormously popular with risk-averse investors. So how do they work?
-
This New Sustainable ETF’s Pitch? Give Back Profits.investing Newday’s ETF partners with UNICEF and other groups.
-
As the Market Falls, New Retirees Need a Planretirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
