Frank's Small Caps

11/28/2003 12:00 am EST

Focus:

Walter Frank

CIO, MONEYLETTER

"International small caps have been red hot lately," says Walter Frank, editor of MONEYLETTER. "Investors have grown more confident in foreign stock markets." The two funds profiled here are among the strongest performers in the international small cap category.

"American Century International Opportunities (AIOIX ) was launched in June 2001. It concentrates on very small firms – with under $1 billion in market capitalization. That means the fund is invested in less-liquid stocks and markets. The managers look for improving revenues and earnings trends via a bottom-up approach. The resulting fund is fairly concentrated, with only about 75 stocks in the portfolio. Total returns have been superb. For the year-to-date through Oct. 31, the fund is up 66%. An overweight position in semiconductors has been a plus. The managers also cite the portfolio’s largest sector, consumer cyclicals, as particularly strong.

"Fidelity International Small Cap (FISMX ) is just over a year old, and what a year it’s been. A near-71% total return for the year ended Sept. 30 put it in the top spot out of 97 international small-cap funds tracked by Lipper. The fund targets non-US firms with market caps under $5 billion. It has two managers; one invests in European stocks and the other searches out Asian opportunities. In selecting stocks, the managers are looking for growth at a reasonable price. Expect to see sizable sector or country bets; for example, the fund currently has nearly a third of assets in Japan."

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