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TW Asset Management Growth Portfolios’ Ken Korngiebel on the benefits and risks of investing in small-cap stocks.
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Thanks -- -- plotting out your investment strategy for next year might pay off debt.
Think small set of focusing on the biggest names in the marketplace that's a strategy of our next guest who manages a fund comp comprise of all small cap companies.
Joining us for a Fox Business exclusive.
From beautiful Portland Oregon.
-- corn -- lead portfolio manager of TW asset management growth portfolios can welcome to the show.
Chris thanks for having me is -- be here -- -- first question I would focusing strictly on small caps is is it more difficult than -- diversify away risk when you're focusing on such a smaller portion of the overall marketplace.
But certainly -- is really difficult to hide and small cap.
First evolve the our business miles that are less diversified than large cap companies be liquidated the stocks is lower in their more sensitive to.
The economy so deceleration at the margin makes it more difficult to performance small cap relative to other asset classes.
You know can we always talk about the effects of Europe bond our own holdings here as investors here in the states.
When we've got a portfolio comprised primarily small cap names how does that impact I would imagine not as much as if -- holding Caterpillar and some of these other multinational.
You know you would you would think that Chris I think one of the difficulties is that while small cap companies tend to have less exposure overseas.
Their part of the risk off trade and so when investors are concerned about the macro environment.
They want to take less risks they see small cap stocks is having -- up to two times a downside in a recessionary environment.
And so they tend to be leaving that asset class when they're concerned about the macro environment even though they don't have a lot of exposure to places like Europe.
Let's -- severe case is that what did the reasoning behind then -- -- -- source fire.
But its ticker symbol FY RE what do you like that.
Well a couple of reasons one is that we think the demand environment for.
Security products is good.
We like the particular placement of source fire within the security industry and then we like where the business model is let's tackle those one at a time.
Today's Wall Street Journal as a virtual advertisement for the securities space.
Reporting -- had in May of 2010.
The US chamber of commerce probably had.
A breach of security and sensitive data was stolen from yeah.
And so on top of mind for any chief technology officer whether they're part of a government agency or large scale enterprises thinking about how to protect the network in the information resides there in.
So we think that even in 2012.
Where you might see some moderation of Investment Technology budgets -- security products ought to be.
Largely more defensible within a ninety budget so we like the demand is set up for source fire.
When we think about the products of the company.
Fire -- a relatively mature area of the market but intrusion detection and prevention.
Is one of the faster growing areas within security.
If you take a look at the ability to understand traffic coming on to the network where it's going who should be authorized for different applications and then the potential for data leakage.
We think source fires products sit very well in the faster growing parts of the market.
I can I wanna get -- to try and -- the wanna get some -- the name's gonna put some of them up there you like on this -- -- incorporated you like Quantum Corp.
at the technology storage company but I do wanna get the Jones Lang LaSalle.
It's a real estate services company you know they run -- but they have real estate exposure.
Now they're not owners of real estate there are very real estate services providers who are involved in.
Capital markets transactions leasing property management.
-- the functions that they provide.
And finally US ecology is another when you like a hazardous waste disposal company and I know is a hot business in general why do you like -- call in particular.
Well -- and particularly because they to have an acquisition which gives them national coverage.
-- acquired a company called stable exit provides them with disposal site.
It allows them to be more vertically integrated.
Saves on transportation routes and we think that the market is underestimating the accretion that's gonna come from that deal like great -- thank you can corn -- we appreciate it lead portfolio manager of -- -- -- asset management.
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