Relative Total Return For Mega-Cap Through Micro-Cap, From 2000, 2002, 2007 And 2009

Includes: IWB, IWC, IWM, IWR, IWV
by: Richard Shaw

Over key time periods since and including the peak year in 2000 for U.S. stocks, mid-caps, small-caps and micro-caps stocks have done better in total return than large-caps, mega-caps and the U.S. broad stock market.

This table shows the calendar year total returns (excluding any tax effect) for Russell Investment U.S. market-cap indexes from the beginning of the calendar years for the peak in 2000, the bottom in 2002, the peak in 2007 and the bottom in 2009. The large-caps and mid-caps were nearly tied from 2009, but the mid-caps were a bit better.

The best three total return indexes are shaded in green. They were the mid-caps, small-caps and micro-caps, except for from 2007 when the large-cap stocks were in the top three and micro-caps were not.

While the mid-caps and smaller did best over the longer periods, the large-caps have moved up in rank over the short-term. Looking at index portfolio statistics, the large-caps look better than the mid-caps and smaller stocks.

The mega-cap Russell 200 and the large-cap Russell 1000 (and by virtue of market-cap weighting, the Russell 3000 broad market index) have generally more attractive valuations.

They have lower P/E ratios (with the caveat that is excluding negatives which may or may not be more in the larger companies).

They have higher 5-year historical earnings growth rates. They have lower, but still healthy long-term earnings growth forecasts, and they have lower historical and forecasted PEG ratios (P/E divided by earnings growth rate).

Those are all indications of more attractive valuation.

click images to enlarge

This chart shows the year-by-year calendar total returns for the indexes. The 2011 index return is not yet published by Russell, so we used the proxy ETF total returns, plus the expense ratio for the ETFs.

This chart indexes the indexes to the beginning of calendar 2000.

This chart indexes the indexes to the beginning of calendar 2002.

This chart indexes the indexes to the beginning of calendar 2007.

This chart indexes the indexes to the beginning of calendar 2009.

Disclosure: QVM does not have positions in any mentioned security as of the creation date of this article (January 2, 2012).

Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice. You are responsible for your own investment decisions. This article is presented subject to our full disclaimer found on the QVM site available here.