‘IN the Nasdaq’ with Gregg Fisher, small-cap portfolio manager at Quent Capital

Gregg Greenberg: Gregg, in your view the world has turned toward de-globalization. So what exactly does that mean?

Gregg Fisher: Well you know de-globalization basically I think we’ve all realized now that comparative advantage has its weaknesses you know having Europe get 90% of its energy from Russia, us you know toting cheap stuff around the world through this South China Sea, having 90% of the world’s semiconductors made on an island next to China, I think we’ve all realized that that’s not necessarily the best idea anymore and we’re seeing this trend toward de-globalization moving things back home. Reshoring. And it’s creating all kinds of opportunity for industries in the most unexpected areas.

Greenberg: And is it creating opportunities for small-cap stocks? Because you’re a small-cap stock manager. In 2022, you had the Russell up about 2%, which is not bad. So how will deglobalization affect your stocks?

Fisher: Well basically when you think about small companies and large companies conditioned on the idea we’re talking about stocks in general, people are diversified. But if you’re going to have some exposure to small companies, a reason for that in this environment first if you think about little companies tend to have more of their revenues, their manufacturing, they haven’t gotten big enough to go global like the large mega companies. So by definition, more of their revenues, more of their production, more of their labor–it’s all happening locally. And that’s a trend that we’re seeing everywhere. A lot of industries around the world are now having to find ways to bring things that are really important to their country like military defense spending, whether it be in the U.S. or in Germany or in Switzerland, or technologies like semiconductors or the things to make medical, pharmaceuticals or the things to make food for all of us here living in whatever country we’re in—so all of these things are really benefiting small companies in interesting ways.

Greenberg: So it’s a small-cap world after all! But does that also apply to foreign small-caps or just here in the U.S. in the coming year?

Fisher: No, it actually applies universally. I mean, every country is having to think about this in ways that they have not had to think about in quite a long time. Now we’ve done research on this. We went back a hundred years in the data. We looked at the returns of small and large companies, studied them during the periods of time where we had globalization and periods of time where we had de-globalization and the data supports the point that small company stocks have large return premiums over large company stocks in periods of de-globalization.

Greenberg: So looking ahead to 2023 what are your expectations for small cap stocks as well as large cap stocks is it a zero-sum game if small does well large cap has to do better can we all rise together?

Fisher: Well, we definitely want to think in relative terms so hopefully we see equity markets do something better than they did in 2022, generally speaking. And I’m not suggesting people should get out of large companies and only move to small companies. But typically, investors are underweight small company stocks in general so I think this is a time for people to consider either going into a market weighting or overweighting small companies in their portfolios and I think as we look forward given what we’ve seen in the last 10 years where small companies have substantially underperformed large companies, which is not typical, combined with the interest rate environment where we see rates Rising which actually narrows the benefit for large companies over small around lending and accessing the debt markets and then this issue with deglobalization, I think this is probably one of the best times to invest in small companies over large that we’ve seen in 50 years.

Greenberg: All right well thanks a lot for coming on and talking about it!

Fisher: Thank you very much, Gregg.