Goldman Sachs sees opportunities in small-cap stocks — even as the Russell 2000 finishes its worst week since early January. Greg Tuorto, who runs the actively managed Goldman Sachs Small Cap Core Equity ETF (GSC) , thinks easing financial conditions should help boost the group. But his view comes with a caveat. “I do think that you have to be very selective in small caps because things can go down with great velocity,” he told CNBC’s ” Fast Money ” on Thursday. The firm’s small-cap portfolio manager suggests looking under the hood of the benchmark small-cap index to identify high quality names. As of Friday, FactSet shows Federal Signal Corp ., SPX Technologies and Core & Main are his fund’s top holdings. “Within the Russell 2000, you have a lot of stuff that you probably don’t want to own,” he said. “There’s a significant amount of unprofitable companies if you look at some of the names that are not necessarily at the largest part of the benchmark. But in that $2 to $5 billion range, you can find some of the companies can make their own weather.” Even with the losing week, the Russell 2000 is up almost 2% for the year, as of Friday’s market close. Meanwhile, Goldman’s exchange-traded fund has outperformed the index, up near 8% in the same time frame. Tuorto contends the interest rate sensitive group is getting ready to play catch-up ahead of expected easing by the Federal Reserve. “Other financial conditions have eased a bit, which is also helpful for small caps. And I do think that a little bit more rate clarity will be a nice tailwind for the group,” he said. According to Tuorto, the semiconductor industry where Nvidia has dominated in 2024 could soon be a proving ground for small caps. He lists Cohu and Onto Innovation as two of his top picks in the space. “We think [they] can benefit from a large recovery in chips and things like high-bandwidth memory, which is an analog to Nvidia’s growth,” he said. “You need that high-bandwidth memory to make those AI…
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