2 Small Caps With Strong Potential

Focus: STOCKS

Craig Hodges Image Craig Hodges Co-Manager, The Hodges Fund

Small-cap manager Craig Hodges explains his company’s strategy for evaluating holdings during market downturns. He also tells Kate Stalter about two little-known stocks that he expects so show big gains going forward.

Kate Stalter: I’m speaking today with Craig Hodges of The Hodges Small Cap Fund (HDPSX).

Craig, I wanted to start out with some current events. This week, as we’re speaking, the market appears to be consolidating in recent sessions. Is that action that should worry investors, or do you see it as just a normal pullback after a healthy run-up?

Craig Hodges: I see it as a normal pullback. Actually, I see it as a very healthy thing for the market. Last year was filled with a lot of volatility, a lot of big down days—three in a row, that sort of thing—and this year we haven’t seen much of that since the markets started surging in October.

I think in 2012, we only had one or two days where the markets been down 100 points. And every time there is a sell-off, you see pretty good buying come in and absorb it and take the market right back up.

So, I think there are a lot of people that have missed this latest rally that are looking for an entry point, and so I view a 3% to 5% correction in the market as a healthy event. And I think there’s so much money on the sidelines that it’ll be absorbed pretty quickly.

Kate Stalter: Do you, as a fund manager, go in there at these pullbacks to support an existing position or get some more shares?

Craig Hodges: We do at some point.