저자: 미상 · 외국인
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워런 버핏·피터 린치 방식의 소형주 투자 전략을 소개. 소형주는 장기적으로 S&P500을 상회했다는 과거 수익률 데이터를 제시하고, Russell 2000 대비 S&P500의 10년 수익률 차이(115% vs 270%)를 근거로 소형주는 ETF보다 종목 선별이 중요하다고 강조. PEG 비율(1 미만 선호)과 EPS 15% 이상 성장 기준을 제시하며, 하락장(2008, 2018, 2022)의 큰 낙폭을 감수해야 한다고 설명.
다듬은 글
Well, the answer to that is that we don't look anymore. It we we assume that there are a reasonable opport number of opportunities as you work with smaller amounts of capital because it's always been true. I mean, it was over the years as I looked at things, uh, clearly you run into companies that are less followed as you get smaller and and there's more chances for inefficiency when you're dealing with something where you can buy $100,000 worth of it in a month rather than 100 million.
When Warren Buffett and Peter Lynch started investing, they were working with a much smaller sum of capital. And what this allowed them to do is invest in a larger range of companies. And this often led the two investors into small cap companies. And small cap companies are typically defined as having a market capitalization between $250 million and $2 billion.
And over the long run, these companies outperform the S&P 500. If you had invested $100 in 1928 in the S&P 500, it would now be worth just under $1 million. However, if you invested the same $100 in small cap companies, it would now be worth almost $5 million. And even over a much smaller time frame, like the last 25 years, midcap and small cap returns have been greater than that of the S&P 500.
We could see that the midcap 400 has produced a return over the last 25 years of 13.1% on an annual basis. Small caps have also outperformed, producing around 12.4% while the S&P 500 has only returned 11.2%. And these are simply returns of an index. If you're willing to dive a little bit deeper, you can have much greater returns.
And Warren Buffett has even talked about this in the past. Well, I would use the approach that I think I'm using now of trying to search out businesses that where I think they're selling at the lowest price relative to the discounted cash they would produce in the future. But if I were working with a small amount of money, the universe would be huge compared to the universe of possible ideas I work with.
Now, you mentioned that 56 to 69 was the best period. Actually my best period was before that was from right after I met Ben Graham in 19 early 1951 but from the end of 1950 through the next 10 years actually returns averaged about 50% a year and I think they were 37 points better than the Dow per year something like that but that I was working with a tiny tiny tiny amount of money and so I would pour through volumes of of of businesses and I would find one or two that I could put $10,000 into or $15,000 into that was just ridic were they were ridiculously cheap.
And while talking about Warren Buffett's returns, he gave away two very important things when taking this approach of looking at smaller cap companies. And one of those is looking for companies that are growing their earnings at a very fast pace. In the S&P 500, 94% of companies have positive earnings with only 6% of companies having negative EPS.
However, when you jump down to the Russell 2000, only 58% of the companies have positive earnings and 42% of the companies are producing negative EPS each and every quarter. So, it's a lot more important to do your due diligence when you are looking at these small companies. But remember, just because a company is putting up negative EPS numbers currently doesn't mean it couldn't change in the future.
What we are looking at here is EPS expectations from analysts as of May 2020 versus March 2021. We can see that in May of 2020 for small cap stocks, analysts were expecting earnings to fall by almost 43%. However, by March of the following year, analyst expectations had flipped to 36% growth for these small cap stocks.
This offers a significant opportunity to capitalize on these differences in expectations. And due to this dramatic change in earnings expectations for small caps, the Russell 2000 increased by almost 70% over the course of the year. However, the S&P 500 only increased by around 36%. The second point that Warren Buffett mentions there that is extremely important is you must be willing to do your research.
You cannot buy ETFs for small caps and expect them to outperform the market. This is the Russell 2000 over the last 10 years. It has only produced 115% returns. However, the S&P 500 over this time period has produced 270% returns. So, when you're looking for these companies, you need to make sure you are finding the ones that are growing their EPS numbers by at least 15%.
If a company is able to grow by 15% on their bottom line, that means that the stock price should double every 5 years. And in terms of company's topline numbers, you want to find revenue growth that is around a similar rate of 15%. Oftent times companies can grow their revenue at a slower rate, let's say 10%, and still put up solid EPS growth.
However, for a lot of these smaller companies, you want to make sure that they are growing well into the future and find higher growth rates for their topline like 15 or even 20% growth. And once you find these companies with strong top and bottom line growth numbers, you need to make sure that you are paying a fair price.
What Peter Lynch likes to use is the PEG ratio. The PEG ratio is the price to earnings to growth ratio and it's calculated by taking the PE ratio of a company and dividing it by their EPS growth. And Peter Lynch loved to buy into companies that had a PEG ratio of less than one. What that means is for Peter Lynch to buy a company at a 25p ratio, it had to have EPS growth of at least 25%.
However, despite the fact that you can achieve outsized returns by investing in small cap companies, you do need to keep in mind that these companies experience far more volatility. We can look at the last few downturns and see this simple fact. In 2022, the S&P 500 fell by 18%. Well, small cap companies fell by almost 24%.
We can see this again in 2018 when large cap companies fell by 4% while small cap companies fell by over 16%. And if we go back to 2008, we can see that large cap companies fell by 36% while small cap companies fell by almost 45%. And Warren Buffett and Peter Lynch understood that these drawdowns were just part of investing.
And here is Peter Lynch explaining that simple fact. And history is the important thing you learn from. What you learn from history is the market goes down. It goes down a lot. The math is simple. There's been 93 years a century. This is easy to do. The market's had 50 declines of 10% or more. So 50 declines in 93 years.
About once every two years, the market falls 10%. We call that a correction. That means that's a euphemism for losing a lot of money rapidly. But we you know we call it a correction and uh uh so 50 declines in 93 years about once every two years the market falls 10%. Of those 50 declines 15 have been 25% or more.
That's known as a bare market. We've had 15 declines in 93 years. So every six years the market's going to have a 25% decline. That's all you need to know. You need to know the market's going to go down sometime. If you're not ready for that, you shouldn't own stocks. And it's good when it happens. If you like a stock at 14, it goes to six.
That's great. You understand the company, you look at the balance sheet, and they're doing fine, and you're hoping to get to 22 with it. 14 to 22 is terrific. 6 to 22 is exceptional. So, you take advantage of these declines. They're going to happen. No one knows when they're going to happen. So in conclusion, if you want to copy the strategies that Peter Lynch and Warren Buffett used to get to where they are today, they started by thinking small by looking at small cap companies that had high growth on their bottom and top lines and making sure that they were paying a fair price for those companies.
And they also had to withstand some significant draw downs to be able to capitalize on the upside that these companies offer. So, with all of that said, I hope you enjoyed the video. If you did, make sure to drop a like down below and let me know in the comment section what small cap companies are you currently looking into.
Thank you guys so much for watching and subscribe for more videos like this one. And as always, have a wonderful rest of your day.
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