Bloomberg reports on how investment managers see big, quality stocks as a better bargain than small and mid caps, most notably Grantham and Yacktman. This is a theme I have seen developing for the past 5-6 months.
The premium investors are paying today to own small-capitalization stocks versus their large counterparts is the biggest in at least 27 years, said James Floyd, senior analyst at Leuthold Group LLC, a research firm based in Minneapolis. Leuthold defines large stocks as those with a market value of more than $9 billion and small stocks as those from $300 million to $1.4 billion.
At the end of the first quarter, small stocks sold for an average price-to-earnings multiple of 18.6 compared with 15.7 for large stocks. The 18 percent gap between the two is the widest since Leuthold began gathering the data in December 1982, Floyd said. In 2000, small stocks sold at about a 40 percent discount to large stocks, he said.
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