LMSIX
Franklin US SmallCap Equity-I
Introduction to Franklin US SmallCap Equity-I
The Franklin US SmallCap Equity-I (LMSIX) is a mutual fund designed to achieve long-term capital appreciation by investing primarily in small-cap companies within the United States. With a focus on equity securities, the fund aims to capture the growth potential of smaller firms that are often overlooked by larger funds. Managed by Franklin Templeton Investments, LMSIX is categorized under the Small Cap segment, making it an attractive option for investors seeking exposure to the dynamic and potentially high-reward small-cap market. The fund’s strategy involves investing at least 80% of its net assets in small-cap equities, providing a concentrated approach to capitalizing on the growth opportunities within this segment.
At A Glance
Executive Summary
LMSIX offers a 40.04% 1-year return with a focus on US small-cap equities, outperforming its benchmark with a 1.03% expense ratio.
High 1-year return of 40.04%. Strong focus on US small-cap equities. Outperforms benchmark S&P 500.
Higher expense ratio at 1.03%. High beta of 1.42 indicates volatility. Limited yield at 0.66%.
Impressive Recent Performance
LMSIX has demonstrated remarkable performance over the past year, boasting a 40.04% return, which significantly outpaces its benchmark, the S&P 500 Total Return Index, which returned 37.62% over the same period. This impressive performance highlights the fund’s ability to capitalize on the growth potential of small-cap stocks, which have been particularly strong in the current market environment. The fund’s strong returns are a testament to its effective stock selection and management strategy, which focuses on identifying undervalued small-cap companies with high growth potential. This performance makes LMSIX an appealing choice for investors looking to enhance their portfolio with high-growth opportunities.
Sector Allocation and Diversification
The sector allocation of LMSIX is well-diversified, with significant investments in Financials (17.72%), Health Care (17.65%), and Industrials (16.41%). This diversification across various sectors helps mitigate risks associated with investing in small-cap stocks, which can be more volatile than their large-cap counterparts. The fund’s exposure to Technology (14.02%) and Cyclical sectors (10.31%) further enhances its growth potential, as these sectors are often at the forefront of innovation and economic expansion. By maintaining a balanced sector allocation, LMSIX aims to provide investors with a stable yet growth-oriented investment option within the small-cap space.
Risk and Volatility Considerations
Investors should be aware of the risk and volatility associated with LMSIX, as indicated by its beta of 1.42, which suggests higher volatility compared to the broader market. The fund’s standard deviation of 6.03% and a max drawdown of -9.9% further highlight the potential for fluctuations in value. However, the fund’s alpha of 2.37% indicates that it has historically outperformed its benchmark on a risk-adjusted basis. The Sharpe Ratio of 0.11 and Treynor Ratio of 1.67 also suggest that while the fund carries higher risk, it has been able to deliver returns that justify this risk. Investors should consider their risk tolerance and investment horizon when evaluating LMSIX.
Competitive Expense Ratio Analysis
LMSIX has an expense ratio of 1.03%, which is relatively higher compared to some of its peers, such as Allspring Discovery SmallCap Growth-Inst (EGRYX) and Artisan SmallCap-Inst (APHSX), both of which have lower expense ratios. Despite this, the fund’s strong performance and effective management may justify the higher costs for investors seeking superior returns. The expense ratio is an important consideration for investors, as it directly impacts net returns. While LMSIX’s expense ratio is on the higher side, its ability to outperform the benchmark and deliver substantial returns may offset the cost for those prioritizing growth over cost efficiency.
Top Holdings and Investment Strategy
The top holdings of LMSIX include Invesco Shrt-Trm Inv Treasury Instl (TRPXX), Sprouts Farmers Market Inc (SFM), and Modine Manufacturing Co (MOD), each representing a small percentage of the fund’s total assets. This diversified approach to stock selection helps mitigate the risks associated with individual stock volatility. The fund’s strategy focuses on identifying small-cap companies with strong growth potential and solid fundamentals, allowing it to capitalize on emerging opportunities within the small-cap space. By maintaining a diversified portfolio of high-potential stocks, LMSIX aims to deliver consistent returns while managing risk effectively.
Comparison with Similar Funds
When compared to similar funds such as Invesco SmallCap Growth-Y (GTSYX) and Carillon Eagle SmallCap Growth-I (HSIIX), LMSIX holds its ground with a competitive 1-year return of 40.04%. While GTSYX has a slightly higher return of 42.15%, LMSIX’s performance is commendable given its focus on a diversified sector allocation and strategic stock selection. The fund’s higher beta indicates a more aggressive investment approach, which may appeal to investors seeking higher returns despite the associated risks. LMSIX’s performance, coupled with its strategic focus on small-cap equities, makes it a strong contender in the small-cap fund category.
Conclusion: Suitability for Aggressive Investors
LMSIX stands out as a compelling option for aggressive investors seeking high growth potential within the small-cap segment. Its impressive 1-year return of 40.04%, coupled with a strategic focus on diversified sector allocation and small-cap equities, positions it as a strong choice for those willing to accept higher volatility for the chance of superior returns. While the fund’s expense ratio is higher than some peers, its ability to outperform the benchmark and deliver substantial returns may justify the cost for growth-oriented investors. LMSIX is best suited for those with a higher risk tolerance and a long-term investment horizon, looking to capitalize on the dynamic opportunities within the small-cap market.
Similar Securities
SCSMX: ClearBridge SmallCap Growth-C | Small Cap Growth Fund Analysis
SCSMX offers exposure to small-cap growth stocks with a high expense ratio of 1.93%. It underperforms its benchmark but provides diversification in tech and healthcare.
LEGFX: BrandywineGLOBAL SmallCap Value-I | Small-Cap Equity Investment
LEGFX offers small-cap value exposure with a 1.22% expense ratio, focusing on undervalued stocks. It has a 25.03% 1-year return, ideal for risk-tolerant investors.
JANVX: Janus Henderson Venture-D | Small Cap Growth Fund Analysis
JANVX offers strong small-cap growth with a 41.42% 1-year return, outperforming its benchmark. Ideal for aggressive investors seeking capital appreciation.
SMEAX: Invesco SmallCap Equity-A | Small-Cap Growth Fund
SMEAX offers robust small-cap growth with a 41.54% 1-year return, outperforming peers. High alpha and diversified sector allocation enhance its appeal.
TRSSX: TRPrice Inst SmallCap Stock-Inst | High Growth Small-Cap Fund
TRSSX offers high growth potential with a focus on small-cap stocks, boasting a 36.72% 1-year return, ideal for aggressive investors seeking capital growth.
Futher Reading
https://finance.yahoo.com/quote/LMSIX/”>Yahoo: Franklin US SmallCap Equity-I
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