The chart below shows the relative returns of the small cap Russell 1000 relative to the large cap S&P 500. I indexed the start value of 100, at dates representing boutiques near me market lows coinciding with economic slowdowns since 1980. On average, the Russell 1000 outperformed the S&P 500 by about 17% one year after the market low. The initial upward thrust in the market has always been marked by large cap outperformance. Tesla (TSLA) – Tesla (TSLA) has seen a large drop ahead of the Model 3 launch. I once worked with a taxable family trust that held an equity portfolio with many positions with very low cost basis (and therefore large capital gains liability if the position were to be sold). stock price is a factor that’s not in most equity quants’ factor lists. I remember that Jeff deGraaf, who was at Lehman Brothers at the time, reported in late 2003 that the return spread between the lowest and highest decile of stock price was about 70% – an astounding return to a factor for less than one year.
Using a long-only approach, this study over the 2003 and previous recovery period suggest that a basket of Phoenix stocks has the potential to rise by a factor of between 2 and 3 over a 12-18 month period. When the economy comes out of recession, shares of near-bankrupt companies see eye-popping returns as they rise Phoenix-like from the ashes of near insolvency. Phoenix candidates are not just small cap stocks, but shares of companies that are at risk of insolvency and benefit from the tremendous positive operating leverage from an improving economy and high financial leverage which put them at risk of bankruptcy. Small Cap Bull 3x (TNA) – TNA continued to skyrocket Thursday after a Trump victory as the economy gears up for strong growth. Shares of Research in Motion Ltd came in with solid earnings on Thursday. I have also closed my position in AA Group shares that were received via conversion of their unlisted warrants.