iQ Small Cap Growth Model

INVESTMENT OBJECTIVE

The iQ Small Cap Growth Model seeks to generate long-term returns in excess of the total return of the S&P 600 Barra Growth Index, with less down-market volatility than the index.

PROCESS

The iQ Small-Cap Growth Model represents an equal-weighted portfolio of small-cap growth stocks selected from the S&P 600 Small Cap Index.

  1. Start with the 600 stocks of the S&P 600 Small-Cap Index.

  2. Sort the 600 stocks by price-to-book ratio and select the highest 300 stocks.

  3. Sort the remaining 300 stocks by Share Buyback ratios and select the top 50.

  4. Sort the remaining 50 stocks by long-term seasonal risk adjusted relative strength and select the top 10.

This model reconstitutes every February, May, August and November

Why invest in small cap growth stocks?

Potential benefits of investing in small cap growth stocks include:

  • Higher Growth Potential: Small cap growth stocks can experience rapid revenue and earnings growth, providing the potential for substantial returns.

  • Market Inefficiencies: Less analyst coverage of small cap stocks creates opportunities to discover undervalued companies with the potential for higher returns.

  • Flexibility and Agility: Small cap companies can quickly adapt to market changes and capitalize on emerging trends, potentially boosting their growth prospects.

  • Portfolio Diversification: Investing in small cap growth stocks adds exposure to diverse industries and sectors, enhancing overall portfolio diversification.

  • Long-Term Potential: Successful small cap growth stocks can grow into large-cap stocks over time, offering long-term wealth creation opportunities.

  • Acquisition Potential: Innovative small cap growth companies may become attractive targets for strategic acquisitions, leading to potential significant returns for investors..

Investing in small-cap growth stocks involves a higher level of risk and volatility compared to larger, more established companies. Small-cap companies may experience more significant price fluctuations due to their smaller market capitalization and limited financial resources. The potential for higher returns also comes with increased market uncertainty and the possibility of greater losses.