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There are moments in a long career when you feel it in your bones. When the planets align. When everything you have learned over decades points to the same conclusion. I am 30 years into this business, and I am telling you: We are living through one of those moments right now.
Small-cap stocks are trading at a 10% discount to the S&P 500. Let me repeat that because it matters. Small-caps historically trade at a 10% premium to large caps. They are riskier, less liquid, more volatile. Investors demand extra return for taking those risks. That premium has existed for nearly a century.
But right now, small-caps trade at a discount. Not a small discount. A 10% discount. That is a 20 percentage point swing from the historical norm. I have seen this only once before in my career: during the late 1990s tech bubble. We all know how that ended.
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Not financial advice.
If you have been reading my work for any length of time, you know I do not pound the table often. I do not get excited easily. Markets have a way of humbling those who think they have it figured out. But I am going to make a strong statement today, and I want you to understand I do not make it lightly.
If you have a five to 10-year time horizon, if you can tolerate volatility, and if you have the discipline to stay the course when the road gets rough, the opportunity in deep value small-caps may be the best risk-adjusted bet available in public markets today. Not good. Not interesting. The best.
This is not speculation. This is not a hot tip. This is what 50 years of academic research across 40 countries tells us happens when valuation spreads reach current extremes. Let me walk you through what I have learned, why it works, and how you can put it to work in your own portfolio (or by taking advantage of the Flagship Report’s Premium Small-Cap Deep Value Portfolio).
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