…Small cap stocks are expected to benefit from the tax reform law due to their domestic orientations and this article identifies the best small cap mutual funds to take advantage of this long term growth trend.

The original article has been edited here for length (…) and clarity ([ ]) by munKNEE.com to provide a fast & easy read.

The chart below shows the stark contrast from the previous earnings growth rates, and what is expected to be obtained for the current quarter and the following four quarters.

…The chart below shows the current dollar earnings growth rates and, as you can see, they are significantly better than the previous four quarters.

Given these high expectations for small cap stocks, we have identified the best small cap mutual funds to take advantage of this long term growth trend. We…looked for funds that had:

• at least 60% exposure to small cap growth stocks,
• a low expense ratio,
• no load fees,
• 1 year total return of +20% or better,
• and a Zacks Rank #1 (Strong Buy), or a Rank #2 (Buy).

From the results, we picked the top 3 (out of 5 that met these criteria).

The Picks

1. TCM Small Cap Growth Fund (TCMSX), a Zacks Rank #1 (Strong Buy), seeks long-term capital appreciation by investing at least 80% in stocks of small capitalization companies.

• Current Sector Allocation: As of the last filing, the company has the most sector exposure in the following:
  • Technology 32.35%,
  • Industrial Cyclical 18.64%,
  • Other 12.35%,
  • Finance 8.8%,
  • and Services 7.8%.
• Cost Specifics: There is:
  • a $2,500 initial investment requirement,
  • a 0.8% management fee with
  • a total expense ratio of 0.95%.
• Performance:
  • YTD return is +22.89%,
  • 1 year +37.47%,
  • 3 year 13.08%,
  • and 5 year +18.52%…
• Top 5 Holdings: As of the most recent filing, the top positions are held in:
  1. MasTec Inc.,
  2. Lumentum Holdings,
  3. Dycom Industries,
  4. Ligand Pharma,
  5. and Kinsale Capital Group.

2. MassMutual Select Small Cap Growth Equity Fund (MSGSX), a Zacks Rank #1 (Strong Buy), seeks long-term capital appreciation by investing primarily in common stocks and equity securities of smaller companies that have potential for long-term growth. The Fund may maintain cash reserves for liquidity and defensive purposes.

• Current Sector Allocation: As of the last filing, the company has the most sector exposure in the following:
  • Finance 34.1%,
  • Technology 20.1%,
  • Industrial Cyclical 17.6%,
  • Healthcare 9.7%,
  • and Services 7.8%.
• Cost Specifics:
  • There is no initial investment requirement,
  • it has a 0.8% management fee
  • with a total expense ratio of 0.96%.
• Performance:
  • YTD return is +20.33%,
  • 1 year +29.64%,
  • 3 year 8.42%,
  • and 5 year +14.98%…
• Top 5 Holdings: As of the most recent filing, the top positions are:
  1. HubSpot Inc.,
  2. 2U Inc.,
  3. Entegris Inc.,
  4. Insulet Corp,
  5. and Wester Alliance Bancorp.

3. Columbia Small Cap Growth Fund (CSGYX), a Zacks Rank #1 (Strong Buy), seeks capital appreciation. The Fund will focus on growth stocks. The Fund will invest at least 80% of its net assets in stocks of companies with a market capitalization, at the time of initial purchase, equal to or less than the largest stock in the Standard & Poor's SmallCap 600 Index.

• Current Sector Allocation: As of the last filing, the company has the most sector exposure in the following:
  • Technology 20.6%,
  • Other 14.2%,
  • Industrial Cyclical 12.4%,
  • Retail Trade 12%,
  • and Finance 12%.
• Cost Specifics:
  • There is no minimal initial investment requirement,
  • it has a 0.87% management fee with
  • a total expense ratio of 0.93%.
• Performance and Management:
  • YTD return is +26.18%,
  • 1 year +37.08%,
  • 3 year 15.77%,
  • and 5 year +15.13%…
• Top 5 Holdings: As of the most recent filing, the top positions are held in:
  • Veeva Systems,
  • Paycom Software,
  • Lending Tree,
  • Coherent Inc.,
  • and WageWorks.

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