With the April sell-off in the rearview mirror, investors may want to start looking at SMIDcap opportunities again to capture value-tilted upside. That’s because their large-cap counterparts have recovered. One fund to consider for exposure is the Neuberger Berman Small-Mid Cap ETF (NBSM ).
Small-cap companies have yet to rebound the way their large-cap brethren have. The Russell 2000 is still in the red. And the S&P 500 has largely recouped its losses from April. However, a rebound could be in the works, especially when the Federal starts to cut interest rates. In a rate-cutting environment, small-caps tend to benefit as their debt servicing costs get lower.
“By capitalization, small-cap stocks are the most undervalued,” said Morningstar chief U.S. market strategist Dave Sekera.
“Historically, small-cap stocks have performed best when the Fed is easing monetary policy and the economy is poised to begin rebounding,” he added. “That does not appear to be the case in the near term. So, while these stocks are undervalued, it may not be until later this year or early 2026 that small caps start to work.”
The thought of small-cap value is appealing. But risk averse investors may not want to go full bore on exposure. This is where an active fund that balances exposure to SMIDcaps can be of benefit.
Active SMIDcap Exposure
Given that NBSM is actively managed, it allows investors to remain fluid amid constantly changing markets dominated by tariff news, interest rates, and geopolitical tensions. The 24-hour news cycle can certainly shift markets quickly overnight. Investors will want to be flexible. Portfolio managers can deftly adjust holdings of NBSM to suit the market environment whether it’s to protect the downside or capture upside.
Investors don’t want just anybody running a fund. That said, NBSM taps into the talent of seasoned investment professionals with over 20 years of market experience and a successful track record. This is essential when navigating the SMIDcap arena that carries its own set of unique market characteristics.
During times of market uncertainty like now, it’s best to stay in quality stocks. This is exactly what NBSM does. That fund scours for SMIDcap stocks that exhibit strong fundamentals. Those include consistent free cash flow generation, above-average profitability, conservative balance sheets, and differentiated business models with durable barriers to entry.
Small-cap companies carry a higher degree of risk and volatility, so to counter that, the fund also invests in midcap equities. Midcap equities can provide Goldilocks exposure to small-caps and large-caps stocks, exhibiting growth characteristics that cater to the former and stability that’s inherent in the latter.
Click here to get more fund information on NBSM.
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