TEMGX
Templeton Global Smaller Companies-A
Global Diversification with a Small-Cap Focus
Templeton Global Smaller Companies-A (TEMGX) is designed to provide investors with long-term capital growth by investing primarily in the equity securities of smaller companies worldwide, including emerging markets. This fund is particularly appealing to those looking for global diversification, as it mandates that at least 65% of its total assets be invested in issuers located in at least three different countries, including the U.S. The fund’s strategy of focusing on smaller companies allows investors to tap into the growth potential of under-researched and undervalued stocks, which can offer significant upside potential. This global small-cap focus is a distinguishing feature that sets TEMGX apart from many other funds in the World Stock category.
At A Glance
Executive Summary
TEMGX offers global small-cap exposure with a 1.32% expense ratio, outperforming its benchmark with a 21.51% 1-year return.
Global diversification with small-cap focus; Strong 1-year performance; Managed by Franklin Templeton.
Higher expense ratio than some peers; Volatility due to small-cap focus; Limited bond exposure.
Impressive Recent Performance
TEMGX has demonstrated impressive performance over the past year, with a 1-year return of 21.51%, significantly outperforming its benchmark, the MSCI ACWI xUS DivAdj Index, which returned 17.25% over the same period. This strong performance can be attributed to the fund’s strategic allocation in high-growth sectors and its ability to capitalize on market opportunities in emerging markets. The fund’s alpha of 4.24% indicates that it has generated returns above the expected benchmark performance, showcasing the effectiveness of its investment strategy. Investors seeking high returns in the global small-cap space may find TEMGX’s recent performance particularly attractive.
Sector Allocation and Growth Potential
The sector allocation of TEMGX reveals a strategic emphasis on cyclical industries, which comprise 33.35% of the portfolio, followed by industrials at 19.19% and financials at 13.19%. This allocation suggests a focus on sectors with high growth potential, particularly in economic upturns. The fund’s exposure to technology (9.54%) and healthcare (12.86%) further underscores its commitment to investing in sectors poised for innovation and expansion. By diversifying across these dynamic sectors, TEMGX positions itself to capture growth opportunities across various market conditions, making it an appealing choice for investors seeking exposure to high-growth industries.
Risk and Volatility Considerations
Investors should be aware of the risk and volatility associated with TEMGX, as indicated by its beta of 1.17, which suggests higher volatility compared to the benchmark. The fund’s standard deviation of 4.20% and a max drawdown of -6.8% highlight the potential for fluctuations in value. However, the fund’s Sharpe ratio of 0.29 and Treynor ratio of 3.61 indicate that it has been able to achieve returns commensurate with its risk level. While the fund’s focus on smaller companies can lead to increased volatility, it also offers the potential for higher returns, making it suitable for investors with a higher risk tolerance.
Competitive Expense Ratio Analysis
TEMGX’s expense ratio of 1.32% is higher than some of its peers, such as Fidelity Adv Intern’l Growth–A (FIAGX) with an expense ratio of 0.0113%. However, the fund’s strong performance and global diversification may justify the higher cost for investors seeking exposure to small-cap stocks worldwide. The fund’s management by Franklin Templeton, a reputable investment firm, adds an additional layer of confidence for investors. While the expense ratio is a consideration, the fund’s ability to deliver superior returns and its strategic global allocation may outweigh the cost for those prioritizing growth potential.
Top Holdings and Market Cap Distribution
TEMGX’s top holdings include a diverse mix of companies such as Tsumura & Co, ASICS Corp, and Integer Holdings Corp, with cash holdings at 5.09%. The fund’s market cap distribution is predominantly in small (34.69%) and medium (37.84%) cap stocks, with minimal exposure to large (4.88%) and extra-large (1.84%) cap stocks. This distribution aligns with the fund’s strategy of focusing on smaller companies, which can offer higher growth potential compared to larger, more established firms. The fund’s top holdings and market cap distribution reflect its commitment to identifying and investing in promising small-cap opportunities globally.
Comparison with Similar Funds
When compared to similar funds such as Alger International Focus-A (ALGAX) and Fidelity Adv Intern’l Capital Apprec-A (FCPAX), TEMGX stands out with its strong 1-year return of 21.51%. While its expense ratio is higher than some peers, its performance and global small-cap focus provide a unique value proposition. The fund’s beta of 1.17 indicates a higher risk profile compared to peers like ALGAX with a beta of 0.87, but this also suggests the potential for higher returns. Investors should weigh the fund’s performance and strategic focus against its cost and risk profile when considering it as part of their portfolio.
Suitability for Growth-Oriented Investors
TEMGX is particularly suitable for growth-oriented investors seeking exposure to global small-cap stocks. Its focus on smaller companies across diverse sectors and regions offers the potential for significant capital appreciation. The fund’s strong recent performance and strategic sector allocation make it an attractive option for those willing to accept higher volatility in exchange for the possibility of higher returns. Investors looking for a fund managed by a reputable firm like Franklin Templeton, with a proven track record of outperforming its benchmark, may find TEMGX to be a compelling addition to their investment portfolio.
Similar Securities
TEMGX: Templeton Global Smaller Companies-A | Global Small-Cap Growth Fund
TEMGX offers global small-cap exposure with a 1.32% expense ratio, outperforming its benchmark with a 21.51% 1-year return.
OPGIX: Invesco Global Opportunities-A | Global Equity Investment
OPGIX offers global equity exposure with a focus on capital appreciation. It stands out with a diverse portfolio and strategic sector allocation.
SMCWX: American Funds SmallCap World-A | Global Small-Cap Growth Fund
SMCWX offers global small-cap exposure with a 1.06% expense ratio, outperforming its benchmark with a 21.75% 1-year return.
Futher Reading
https://www.morningstar.com/funds/xnas/TEMGX/quote
https://finance.yahoo.com/quote/TEMGX/”>Yahoo: Templeton Global Smaller Companies-A
https://ftcloud.fasttrack.net/web/chart/TEMGX
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