Newsletter Watch: Favorite small-cap funds

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This week, we follow up on our previous two Newsletter Watch columns, returning to favorite ideas among small-cap funds, as well as a look at two small-cap stocks that fit the "guru strategy" of Warren Buffett.

Two weeks ago, we featured favorite small-cap funds from Jim Lowell. Here, we add a new trio of advisors who see upside potential in small-cap funds and ETFs.

Carl Delfeld, of Chartwell ETF Advisors, is known for his expertise in exchange-traded funds, and his latest "pick of the week" is a bet on the iShares MSCI Japan Small Cap (NYSE:SCJ). The reasons behind DelFeld’s selection are as follows:

1) Small-cap Japanese stocks listed on Japan's second section are collectively trading at below book value.

2) Japanese market is exhibiting stronger momentum.

3) Japanese small-cap stocks are less affected by yen and U.S. dollar fluctuations.

4) Expectations for Japanese economic growth are very low with upside surprise likely.

An added catalyst, he suggest is that global equity managers are scrambling to gain market weighting for Japan after being underweight for some time.

Meanwhile, Thurman Smith, editor of Equity Fund Outlook, sees opportunity in Intrepid Small Cap (MUTF:ICMAX). "Over its first year and a half, the fund lagged its small-cap value competition, but it has held up well enough in the last seven months to deliver an annualized return of 8.2% over its 2.5-year life, a return almost [three times] that of the MSCI Small Cap Value Index," Smith says.

He says that the main focus of this "little-known fund" is on stocks with predictable revenue streams, and that are in industries with high barriers to entry.

Smith points out that Intrepid is a Florida boutique headed by Mark Travis. With a low risk rating, he says, "Intrepid Small Cap might interest conservative investors who want coverage in this area and are willing to accept modest up-market . . .

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