Jim Oberweis is president and lead portfolio manager of Oberweis Asset Management and president of The Oberweis Funds. Oberweis Asset Management, Inc. is a growth equity investment management firm that manages approximately $1.5 billion in micro, small, and small/mid capitalization growth strategies globally, primarily for institutional investors and its own proprietary mutual fund family. Oberweis is a Chartered Financial Analyst. He earned an MBA with high honors from the University of Chicago and a B.S. in Computer Science from the University of Illinois. 

SmallCapInvestor.com’s Jennifer Schonberger interviewed Oberweis last week about his outlook for small caps and some of his specific small-cap recommendations.

“Valuations have been pushed down to a point where there are above-average opportunities now with our universe of smaller, high-growth companies. Maybe once a decade you see — for whatever reason — uncertainty and fear in the marketplace push valuations down to a point where even a modest improvement in sentiment for an uncertain economic outlook can dramatically shift the momentum of stock prices. The best example I can give you is 1990, where we saw a similar drop in prices. In 1991, we probably saw the biggest rise ever for smaller growth stocks.

“At some point the valuations are so low that the marginal risk associated with negative news is really not that high. The market already expects everything to be terrible. So if everything is terrible, that’s meeting expectations. If things come out to be not as terrible as people expect, prices will go up. We can tell based on the mathematics of valuations that we’re about as low as we’ve ever been in the last decade. [The recession and the bad news] is completely priced in. Despite horrific results for small growth stocks in the past six or seven months I think they’re very well-positioned going forward on a prospective basis.

“I think (first quarter) earnings will be lousy. They’ll probably remain subdued for the rest of the year. When we get into these types of environments, investors don’t tend to look at the next quarter. They’re discounting the possibility of this continuing on for the next several years. As soon as you see the first rays of . . .

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