3 Small Cap Picks. Plus, Balancing the Magnificent 7

This podcast episode discusses the performance of big tech companies and explores alternative paths for growth. It highlights the challenges of diversifying away from big tech while still capturing growth opportunities and suggests considering a Nasdaq 100 equal weight ETF as a way to achieve diversification. The episode also explores different strategies for achieving tech exposure, including custom indexing and fundamental-based investing. It delves into the details of Dimensional Fund Advisors and their factor-based approach to investing, highlighting their impressive performance. Additionally, the episode discusses the potential of small cap stocks, emphasizing their attractive valuation and potential opportunities for investors. It provides insights into Alger's approach to finding the best small cap growth stocks, focusing on science-based and innovation-driven companies. The episode also discusses the importance of a strong and wide moat for sustaining growth and highlights the innovative approaches of companies like Prose Holdings and Wingstop in their respective industries. Takeaways • Big tech companies have consistently outperformed the rest of the S&P 500, but investors may feel trapped in a "big tech purgatory." • Diversifying away from big tech can be challenging, but a Nasdaq 100 equal weight ETF can provide diversification while still capturing growth opportunities. • Custom indexing and fundamental-based investing are alternative strategies for achieving tech exposure. • Dimensional Fund Advisors uses extensive academic research to generate better returns in the stock market and offers ETFs based on its processes. • Small cap stocks can be attractive in terms of valuation, and Alger focuses on science-based and innovation-driven companies in this market segment. • Small companies with the potential to become exceptional large companies are sought after by Alger. • A strong and wide moat is important for sustaining growth in companies. • Prose Holdings and Wingstop are examples of companies with innovative approaches and sustainable revenue and profitability growth.