3 Small-Cap Value Mutual Funds for Attractive Returns

Small-cap value mutual funds provide excellent choices for investors looking for bargains, i.e., stocks at a discount with impressive growth potential. Value mutual funds comprise stocks trading at a discount to book value, low price-to-earnings ratios and high dividend yields.

Value investing is a very popular strategy, that too for a good reason. After all, who doesn’t want to find stocks with low PEs, solid outlooks, and decent dividends? Added to that small-cap funds are good choices for investors with a high-risk appetite, as companies with small market capitalizations are expected to have higher growth potential than large- and mid-cap companies.

Small-cap funds generally invest in companies having a market cap lower than $2 billion. Also, small-cap funds are expected to provide diversification across different sectors and companies.

Below, we share with you three top-ranked small-cap value mutual funds, viz., Invesco Small Cap Value Fund VSCAX, Towle Deep Value Fund TDVFX and Pinnacle Value Fund PVFIX. Each has a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of Small Cap Value mutual funds.

Invesco Small Cap Value Fund seeks to achieve capital appreciation by investing the majority of its net assets in undervalued equity securities of small-cap companies. VSCAX advisors also invests in derivatives and other instruments that have similar economic characteristics.

Invesco Small Cap Value Fund has a three-year annualized return of 32.9%. As of January 2023, VSCAX held 99 issues, with 2.6% of its assets invested in NORTHERN OIL &GAS.

Towle Deep Value Fund invests the majority of its net assets in equity securities of U.S. companies. TDVFX advisors also invests in small companies that are undervalued.

Towle Deep Value Fund has a three-year annualized return of 25.5%. G. Lukas Barthelmess has been the fund manager of TDVFX since 2021.

Pinnacle Value Fund invests in equity securities of companies, including common and preferred stocks, convertible securities, rights and warrants. PVFIX also invests in a diversified portfolio of securities issued by small and micro-cap domestic companies that the advisors perceive as being traded at notable discounts in relation to their inherent earnings potential or asset valuations.

Pinnacle Value Fund has three-year annualized returns of 16.2%. PVFIX has an expense ratio of 0.75% compared with the category average of 1.16%.

To view the Zacks Rank and the past performance of all small-cap value mutual funds, investors can click here to see the complete list of small-cap value mutual funds.

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