Hi, I'm Susan Chabinsky with Morning Star. On a recent episode of the Morning Filter podcast, I interviewed Morning Star's Brian Armor about small cap ETFs. Brian is Morning Star's director of ETF and passive strategies research for North America, and we chatted in early September.Here's an excerpt from the podcast. Now, Brian, the Morning Filters audience is made up primarily of investors who are buying individual stocks. So make the case for why maybe when it comes to small cap stocks, an individual stock ...

Group 1: Investment Opportunities - The Atlanta Braves are considered a trophy asset, providing a rare opportunity for individual investors to buy into a sports team, especially as the stock is currently undervalued at around $40 per share, with an estimated worth of $60 based on conservative assumptions [2][3] - Madison Square Garden Sports, which owns the Knicks and Rangers, has an enterprise value of $5.5 billion, while comparable assets like the Lakers have been valued at $10 billion, indicating significant upside potential [4] - Uber is highlighted as a strong investment, with the company generating substantial cash flow and expected to benefit from the advent of autonomous vehicles, countering previous concerns about profitability [6][7] Group 2: Company Analysis - Unified, the third-largest garment rental company in the U.S., is currently priced at $170 per share, with a previous acquisition offer from Cintas at $270, suggesting potential for future growth [8][9] - Unified is described as a family-controlled business, which requires careful consideration, but it possesses a cash-rich balance sheet, making it a stable investment in a high-priced market [9]

Core Insights - The article discusses the performance comparison between the S&P 600 and the Russell 2000, emphasizing the impact of profitability on investment returns [11][28]. - It highlights that the S&P 600, which requires companies to be profitable, has consistently outperformed the Russell 2000, which includes a significant number of unprofitable firms [10][14][28]. Group 1: Performance Comparison - The S&P 600 has shown better performance over various time frames compared to the Russell 2000, with most one-year, five-year, and ten-year rolling returns favoring the S&P 600 [14][19][22]. - Historical data indicates that investing in the S&P 600 for any ten-year period over the past 31 years would yield positive returns [26][28]. - The S&P 600's requirement for positive GAAP earnings contributes to a higher quality of aggregate earnings and cash flow, leading to improved returns [28][30]. Group 2: Investment Strategy - A systematic investment strategy that focuses on high profitability stocks can yield better returns compared to a strategy that includes low or non-profitable stocks [5][11]. - The article suggests that a diversified basket of profitable stocks can provide stable cash flow and high yield, akin to a long-term fixed income investment [7][8]. - The performance of the Russell 2000 is negatively impacted by its higher proportion of unprofitable companies, which dilutes overall returns [10][14].

Group 1 - The article does not provide any specific content related to a company or industry [1]

RT Merryn Somerset Webb (@MerrynSW)Retail investors.. with passive still on the up and institutional investors moving up the market cap scale, small and mid cap investing is all about you. Maybe buy shares in companies that actually get that (and give you biscuits)... https://t.co/MFvy8jllcw ...