Originally posted @ http://www.ritholtz.com/blog/wp-content/uploads/2011/08/Bank-Gx62.pdf
Beaten-down small-cap stocks could be ready to rally, some say
among professional investors.
“If we’re not in an economic recession,
we could see a decent rally in small-cap
stocks,” said Steven DeSanctis, small-cap
strategist at Bank of America Merrill
Lynch inNew York.
Small-cap stocks have lost so much
value this year — about 25 percent since
their late-April peak, as measured by the
small-cap Russell 2000 index — that De-
Sanctis thinks “flat is the new up”: If they
simply end the year where they started,
investors will see about a 13 percent rally
from where they are now. Large-cap
stocks slid about 18 percent in the same
period.
Bank of America sees a 40 percent
chance of recession, he added.
“That’s really the question that people
have to answer for themselves — ‘Do we
think a recession will occur?’ ” said Matthew
Litfin, a portfolio manager at William
Blair who invests in small- and midsiz
