Cheap, high-quality international small-cap stocks are the bedrock of Costa’s portfolio.After an eventful first four months of the year, there's finally enough of a sample size to see which stock-pickers are thriving and who's getting left in the dust.
"The way I think about our approach is: we're a boxer punching with both fists," Costa told Insider in a recent interview."We want to think about the upside, so we definitely get excited when we see that upside case, but we want the downside protection too."Many US-based investors have a strong domestic bias, meaning they primarily put their money in companies based in the US that they're already familiar with.
"This perception of higher risk — I think — is unwarranted, but we like the perception being that way because it provides us with that dislocation," Costa said. "What's very interesting about non-US small caps is that you could find many companies that are by definition small caps, but when you look at the businesses, they have large-cap characteristics," Costa said."And the reason is because many of these businesses operate in small countries."