Small-Cap Investment Strategy Yields Success: Insight into a Lucrative Venture
In the midst of the market selloff earlier this year, David Wagner, the manager of the T. Rowe Price Small-Cap Value Fund, adopted a contrarian investment strategy. His focus was on buying stakes in companies whose shares had been heavily depressed but whose business prospects he believed were solid.
One such example is his investment in Steven Madden, a shoe company. Wagner bought shares in the company after its stock fell nearly 50%. Noteworthy is the fact that Steven Madden holds the position as the top importer of women's shoes in the U.S., with a significant portion coming from China. Since hitting a low in mid-April, the stock of Steven Madden has recovered 27%.
Another successful investment was made in Carvana, a used car retailer. Wagner bought Carvana stock as the firm teetered toward bankruptcy for $30 a share in late 2023; it recently traded for $327. Carvana is now a large cap stock.
Wagner's strategy is to invest with a long time horizon and not sell arbitrarily when stocks surpass small-cap measures. This approach is evident in his holding of Carvana stock through its transformation into a large-cap stock.
The T. Rowe Price Small-Cap Value Fund, under Wagner's management, has shown consistent performance. Over the past 12 months, the fund has had a 3.0% gain, while the benchmark logged a slim, 1.2% gain. Over the past decade, Wagner's 7.7% annualized return has beaten 72% of his peers in managing the fund.
Interestingly, the T. Rowe Price Small-Cap Value Fund has not been mentioned in the context of ETF closures, best small-cap ETFs to buy now, or bond funds amid tariff volatility. This indicates that Wagner is not saying that tariffs are not a problem, but none of this stuff is settled according to him.
The T. Rowe Price Small-Cap Value Fund is a member of the Kiplinger 25, which are Kiplinger's favourite no-load mutual funds. Wagner trimmed stakes in utility stocks and real estate investment trusts (REITs) during the market's worst days, preferring to invest in retail and restaurant businesses, as well as materials and chemicals companies with exposure to global trade.
In conclusion, Wagner's approach during the selloff was to look for unloved companies with differentiated business models and invest with a long-term perspective, capitalizing on market overreactions and distressed valuations. His investments in Carvana and Steven Madden serve as testaments to this strategy's success.
[1] This paragraph is a summary of the bullet points provided, presented in a way that flows cohesively with the rest of the article.
Investing in Carvana and Steven Madden, both companies whose shares had been heavily depressed, is part of David Wagner's contrarian investment strategy in finance. Wagner's focus is on long-term investments and not selling arbitrarily, as witnessed through his holding of Carvana stock even as it transformed into a large-cap stock.
