Small caps get even pricier


"We start to get a little queasy when we hit 19x," says BAML's Steven DeSanctis, unable to find bargains in any sector of the small cap universe.

The Russell 2000 is up 29% this year, and 5.4% over the three months, easily cruising past the S&P 500's 21% and 2.7% gains, but the small cap's P/E ratio has risen to just over 18 vs. a long-term average of 14.9.

The lofty valuation has BAML recommending clients swap out of U.S. growth for global growth as small caps generally have less exposure to international action.

Small cap ETFs: IWM, VTWO, EWRS, SRTY, TWM, RWM, TNA, URTY, UWM, TZA, SMLV, TWOKIWO, VTWG, UKK, SKKIWN, VTWV, UVT, SJH.

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Comments (1)
  • IV Investor
    , contributor
    Comments (6) | Send Message
     
    Russell 2000 P/E is actually 32x. 18x P/E is if you exclude companies with losses. P/E of 32 is extremely high.
    21 Oct 2013, 02:40 PM Reply Like
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