The dogs of summer

Cappy Price finds no value in small caps

Last year proved to be the worst of times for small caps. As of April 8, Standard & Poor’s Small Cap 600-an index of companies with a market capitalization of $500 million or less-was down a staggering 23.2% over a 52-week period.

The picks of Cappy E. Price, co-manager of the Chicago-based Blair Value Discovery Fund, turned in a horrible performance as well. When be interviewed her last year, she asserted that when she picks small caps, it’s "like finding a secret before the rest of the world takes notice." Well, the value of Price’s selections is still hidden. Out of the five stocks she selected on April 24, 1998, four declined more than 25%. (Price declined our request for an interview.)

The stock that slid the least was Excel Realty Trust Inc., a San Diego real estate investment trust, which acquired New Plan Realty Trust REIT in New York last September. The $1.1 billion acquisition created one of the largest community shopping center companies. Shares of the company surged to a high of $25 on July 8, 1998, but since then have been in free fall due to the economic turmoil in other countries. By September 3, 1998, they had reached a 52-week low of $17.92. The stock of the newly formed company, New Plan Excel Realty Trust Inc. (NYSE: NXL), closed at $18.81 on April 8.

Shares of Braun Fashions Corp. (Nasdaq: BFCI), a specialty retailer of women’s apparel in Plymouth, Minnesota, and Maxxim Medical Inc. (NYSE: MAM), a manufacturer of specialty medical products in Clearwater, Florida, fell sharply despite strong first- and fourth-quarter earnings. Braun and Maxxim’s shares fell 12.1% and 33.4%, respectively, since the date Price recommended both companies.

Shares of Denison International (Nasdaq: DENHY), a London-based firm that designs hydraulic equipment, and Easco Inc. (Nasdaq: ESCO), the nation’s largest independent aluminum products shaper, fared even worse. Denison’s shares fell 25.2% while Easco’s plummeted 50.4% since Price’s recommendations. Denison’s net income fell in the fourth quarter because of a slowdown in the hydraulics industry brought on by Asia’s economic woes. Easco took a $2.6 million charge in the fourth quarter because it had to cut inventory levels as aluminum prices dropped.

ASSET ALLOCATION
Portfolio building
Achieving the best results from your investment portfolio requires the effective deployment of financial resources as well as the adoption of a disciplined investment strategy. According to Richard Cripps, chief market strategist for Baltimore-based Legg Mason Inc., asset allocation models should be compiled taking into consideration current market, economic and political conditions. The pie charts below illustrate how four different hypothetical investors might allocate their investments.

Price’s Odd Lot of Losers

Stock (Exchange: Symbol)

Current Price*

Price at Recommendation

Total Return

Current Value

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