The Low Cost of High Quality: Russell 2000

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The Low Cost of High Quality: Russell 2000

Introduction:
This paper employs similar analytical structures to those used in our newsletter High-Quality Midcap Value, The Case for Common Sense. In this paper, Kailash presents what we believe is compelling evidence that:

  1. Record Quality Spreads: The spreads between the highest and lowest quality firms in the Russell 2000 index have hit levels last seen during the internet mania
  2. Record Value Spreads: Like 2000, today, the lowest quality firms are trading at a very large premium to the highest quality firms; the only difference between today and 2000 is the spreads today are 2x wider
  3. Conclusion: With Quality & Value spreads both at the widest levels since 1978, today is the single best opportunity to buy high-quality small-cap firms in over 40 years

Disclaimer

The information, data, analyses, and opinions presented herein (a) do not constitute investment advice, (b) are provided solely for informational purposes and therefore are not, individually or collectively, an offer to buy or sell a security, (c) are not warranted to be correct, complete or accurate, and (d) are subject to change without notice. Kailash Capital, LLC and its affiliates (collectively, “Kailash Capital”) shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses, or opinions or their use. The information herein may not be reproduced or retransmitted in any manner without the prior written consent of Kailash Capital.

In preparing the information, data, analyses, and opinions presented herein, Kailash Capital has obtained data, statistics, and information from sources it believes to be reliable. Kailash Capital, however, does not perform an audit or seeks independent verification of any of the data, statistics, and information it receives.

Kailash Capital and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your tax, legal, and accounting advisors before engaging in any transaction.

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