As 2024 closes and investors look ahead to the new year, the market landscape presents unique opportunities for small-cap investing and may be particularly compelling for the Ironwood Investment Management, LLC, Small Cap Core (SCC) Strategy. A combination of historical market trends and Ironwood’s performance as the #1 ranked small cap fund in the eVestment database (trailing 12 months, as of 9/30/2024), may position it to continue to thrive in the coming months.
The Impact of the “January Effect”
The “January Effect” refers to a historical market phenomenon where small-cap stocks often outperform large-caps at the start of the year. This trend is largely attributed to year-end tax-loss harvesting, where investors sell off depressed stocks to offset capital gains and reduce tax liabilities. These sell-offs may temporarily bring down individual stock prices, creating a window of opportunity for savvy investors.
In January, many of these stocks are repurchased, driving prices back up as demand returns. Ironwood has strategically positioned its portfolio to potentially benefit from this trend by adding several undervalued, high-quality small-cap companies in recent months. These additions align with Ironwood’s investment philosophy of identifying “High IQ” (High Ironwood Quality) companies with exceptional management, strong financials, and sustainable business models.
Taking Advantage of Market Weakness
While the broader market exhibited weakness at the end of December, it’s important to recognize that such periods often create opportunities for long-term investors. In fact, taking advantage of periods of volatility is a core attribute of Ironwood’s Small Cap Core investment philosophy. Valuations in the small-cap space remain attractive, with many companies trading at discounts relative to their intrinsic value. Ironwood’s disciplined approach, focused on rigorous research and active management, may position its portfolio to capitalize on these opportunities, as the Strategy has achieved in the past.
Continued Leadership in Small Cap Investing
Ironwood’s Small Cap Core Strategy continues as a leader in its category, ranked as the #1 small-cap fund in the eVestment database based on trailing 12-month performance as of September 30, 2024. This ranking underscores the strategy’s ability to deliver risk-adjusted returns even during challenging market conditions.
For investors considering adding to the small-cap asset class, now may be an opportune time. The combination of year-end tax-loss harvesting and the potential for a rebound during the January Effect offers a favorable entry point for those seeking to benefit from small-cap growth.
Additionally, as interest rates continue to decline into 2025, as the Fed has signaled, the market may see outperformance in the small cap sector versus large cap stocks, as we have seen historically.
Looking Ahead
The Ironwood Small Cap Core Strategy’s proven track record, coupled with its strategic positioning for the “January Effect”, may make its Small Cap Core Strategy a compelling choice for investors looking for the best small-cap investing options. By focusing on undervalued opportunities and leveraging historical market trends, Ironwood continues to deliver on its promise of disciplined, high-quality small cap investing.
Seize the Small-Cap Advantage with Ironwood
The start of a new year often brings renewed optimism and fresh opportunities in the market. Ironwood Investment Management, LLC may be the ideal partner for investors seeking to capitalize on the potential of small-cap stocks, particularly in light of the “January Effect” and anticipated market trends.
Ironwood’s Small Cap Core Strategy offers a compelling approach to navigating the small-cap landscape. With a disciplined investment philosophy, a focus on “High IQ” companies, and a proven track record, Ironwood is well-positioned to help investors achieve their financial goals through small cap investing.
Ready to explore the potential of small cap investing with Ironwood?
PERFORMANCE DATA AND DISCLOSURES
Performance Statistics as of 9/30/2024
Ironwood Investment Management®, LLC (Ironwood) is an independently managed investment advisory firm providing investment advisory services to institutional clients, mutual funds and high-net-worth clients. The firm is a registered investment adviser with the Securities and Exchange Commission. SEC Registration does not imply a certain level of skill or training. Accounts in the Small Cap Core composite include separately managed, fully discretionary, fee-paying portfolios. Portfolios are invested in undervalued securities, the majority of which will have market capitalizations under $2.5 billion at cost, including securities with growth and/or value characteristics. Securities are considered undervalued when management believes the current share price does not accurately reflect the long-term economic value of the underlying company. Ironwood Investment Management, LLC claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Ironwood Investment Management, LLC has been independently verified for the periods January 1, 1999 through December 31, 2021. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. The Small Cap Core composite has had a performance examination for the periods July 1, 2002 to December 31, 2021. The verification and performance examination reports are available upon request. GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. The creation date of the composite: July 2002. Performance inception date of the composite: January 1, 1999. Prior to July 2002, portfolios were included in the composite when at least 75% of the portfolio was invested in equity securities and when at least 75% of the portfolio was invested according to the investment style of the composite. Subsequent to July, 2002, portfolios are included in the composite after the first full month of being fully invested. Returns are presented gross and net of management fees and include the reinvestment of all income. Net returns are calculated based on the highest fee of 1.00%. Investment management fees are 1.00% on the first $25 million, 0.90% on the next $25 million, 0.80% on the next $50 million, and 0.75% over $100 million on an annual basis and a client’s return will be reduced by these and other related expenses. The actual fee charged to an individual portfolio may vary by size and type of portfolio and may be negotiated. Actual investment advisory fees incurred by clients may vary. The Russell 2000 Index consists of the 2000 smallest stocks in the Russell 3000 Index that represents approximately 8% of the U.S. equity market capitalization. The indices have been reconstituted annually since 1989. Ironwood returns and Index performance reflect reinvested interest income and dividends, in U.S. dollars. A list of composite descriptions and a list of limited distribution pooled fund descriptions are available upon request. Past performance is not indicative of future results. Policies for valuing investments, calculating performance and preparing GIPS Reports are available upon request. Prior to May 2006, the Firm was known as Ironwood Capital Management, LLC.