In a year when the S & P 500 is touting a 15.5% advance, small-cap stocks look underwhelming – but investors shouldn't shy away from them, said Julie Biel, chief market strategist at Kayne Anderson Rudnick. "I don't think you want to avoid them — they're part of a balanced diet," said Biel, who is also a portfolio manager at the firm.
The resulting "double exposure" makes sense when it comes to why investors are shunning the space, the strategist said. "Earnings in small and mid cap have not done as well; they haven't really bottomed. A lot of these businesses don't have the kind of market control that larger companies do and have been very hurt by inflation and higher labor costs," said Biel. Biel herself manages a small- and mid-cap growth portfolio and takes a long-term investment approach.