Latest news with #MilesLewis
Forbes
19-05-2025
- Business
- Forbes
Forbes Daily: Moody's U.S. Credit Downgrade Kicks Off Stock Futures Slump
Big growth companies have been the winners on Wall Street for the last 16 years. But with the current economic uncertainty, it could be time for small stocks to shine. Miles Lewis manages $1.5 billion, most of it in the Royce Small-Cap Total Return Fund. He makes the case that small companies are more domestic-focused than the multinational firms in the S&P 500, for instance, meaning they are 'more insulated from retaliatory tariffs.' Still, the current tilt to big growth companies is extreme: A decade ago, the ratio of the collective value of the market's five most valuable companies compared to the companies in the small-cap Russell 2000 index hovered just above 1 to 1. Now, it's just shy of 5 to 1. People walk outside 7 World Trade Center, home of Moody's Corporation headquarters on March 18, 2025 in New York City. ANGELA WEISS/AFP via Getty Images Financial ratings firm Moody's Ratings downgraded the U.S. government's credit ratings Friday, citing its rising debt and interest in a move that underscores a ballooning federal budget deficit, making it the last of the big three firms to downgrade the government's credit. U.S. stock futures slid early on Monday, while long-dated Treasury yields breached the 5% mark. President Donald Trump, former President Barack Obama and many other leaders from across the political sphere expressed their support for former President Joe Biden and wished him a speedy recovery after he was diagnosed with an 'aggressive form' of prostate cancer. 'Nobody has done more to find breakthrough treatments for cancer in all its forms than Joe,' Obama wrote. In a social media post over the weekend, President Donald Trump told Walmart to stop blaming his sweeping tariffs as the reason for price increases, and instead urged the retail conglomerate to absorb the costs of the tariffs. 'Walmart made BILLIONS OF DOLLARS last year, far more than expected. Between Walmart and China they should, as is said, 'EAT THE TARIFFS,' and not charge valued customers ANYTHING.' Dick's Sporting Goods will acquire Foot Locker for $2.4 billion, nearly tripling its total store count and expanding its presence in the sneaker and sportswear markets. The move is also expected to benefit Nike, as footwear currently represents 38% of Dick's business and over half of Foot Locker's, and Nike is the top-selling footwear brand for both. From left: SpaceX President & COO Gwynne Shotwell, Apple CEO Tim Cook, Microsoft Chairman & CEO Satya Nadella PATRICK T. FALLON/BLOOMBERG, JUSTIN SULLIVAN/GETTY IMAGES, SEBASTIAN CHRISTOPH GOLLNOW/GETTY IMAGES Most of the nearly 900 billionaires in the U.S. got rich by building businesses or inheriting big bucks from someone who did, but a small and growing group of current and former American executives have amassed three-comma fortunes while working for others. Altogether, Forbes found 48 of these hired-hand billionaires in 2025, up from 29 a year ago. And that count is sure to keep climbing thanks to soaring share prices and sky-high executive pay packages. Last minute concessions secured unified Republican support in a key House committee for President Donald Trump's 'big, beautiful bill' Sunday night, after conservative holdouts had blocked its passage on Friday. The nonpartisan Committee for a Responsible Federal Budget estimated the bill would add at least $3.3 trillion to the federal debt over the next 10 years. The Federal Reserve will slash its staff by 10%, or about 2,000 workers, over the next few years, Chairman Jerome Powell told employees in a memo. Part of the deduction will come from deferred resignations for employees eligible for retirement. Though independent from the executive branch, it's the latest agency to cut back amid Trump and DOGE's efforts to shrink the federal workforce. The Supreme Court on Friday blocked the Trump Administration from further deportations of migrants using the centuries-old wartime law known as the Alien Enemies Act. In an unsigned decision, the court said the administration did not provide detainees enough time to challenge their removal in court. The FDA greenlit the first blood test to diagnose Alzheimer's disease Friday, a major benchmark that a top agency official said will make diagnosing the brain disorder 'easier and potentially more accessible.' An estimated 6.7 million Americans have Alzheimer's, according to the CDC, a number expected to double by 2060. Many of us think of family vacations as something that happens before children leave home, but surveys show traveling with older children, and multi-generational travel as a whole, is becoming increasingly popular. One expert at the Metropolitan State University of Denver attributes the trend to two themes: bonding time away from everyday routines and a desire to leave an 'experiential' legacy. Nujuma, the first Ritz-Carlton Reserve in the Middle East, opened in 2024. NUJUMA As summer approaches, the dream of a peaceful beach escape can quickly devolve into the reality of battling over limited parking spots, securing the last beach umbrella and wrangling the best lunch reservations. This year, leave all that stress behind. Instead of elbowing through throngs on South Beach, it may be time to try that secluded stretch along Florida's 30A highway. Rather than following the crowds to Waikiki Beach, consider a quiet Malaysian retreat. For those seeking a summertime trip beyond the bustling tourist trails, Forbes Travel Guide's editors put together a list of 18 under-the-radar beach havens. It includes places like the world-class Mandarin Oriental, Canouan, in the small Caribbean nation of St. Vincent and the Grenadines. It sits on Godahl Beach, the white-powdered playground that's blanketed with the Five-Star resort's colonial-style suites, Italian-designed villas and a spa with hillside palapas. Or try D Maris Bay, a Turkish resort where the Aegean and Mediterranean seas meet. It features six distinct beaches—ranging from a club scene with DJs and late-night parties to a family-friendly option with a kids' club—and a yacht for water adventures. And while Tuscany may not be the first destination that springs to mind when dreaming up a beach getaway, the Four-Star Hotel Principe Forte dei Marmi, is worthy of one. MORE Forbes Travel Guide's 25 Most Anticipated Hotel Openings Of 2025 The Trump Administration continues to reshape the media landscape with its latest move to lay off about one-third of the workforce at the federally-funded Voice of America. Nearly 600: The number of Voice of America employees laid off $20 billion: The amount that Trump is suing CBS for claiming it deceptively edited its 60 Minutes interview with Kamala Harris interview with Kamala Harris The amount that Trump is suing CBS for claiming it deceptively edited its 60 Minutes 'There's more to come': According to Kari Lake, senior adviser for Voice of America's parent company, the U.S. Agency for Global Media In a job market where employers increasingly value skills, earning micro-credentials can help boost your salary. It allows you to demonstrate mastery of in-demand abilities and shows a commitment to continuous learning—both of which can reduce an employers' training expenses in the long run. Start by researching employer preferences to find out which certifications are most sought-after, prioritize those that bear credits, and be prepared to quantify the impact of the skills when negotiating your salary. Taxpayers in which state could be on the hook for millions of dollars of President Donald Trump's legal fees after its governor signed a new bill into law? A. New York B. Georgia C. Florida D. New Jersey Check your answer. Thanks for reading! This edition of Forbes Daily was edited by Sarah Whitmire, Chris Dobstaff and Caroline Howard.
Forbes
17-05-2025
- Business
- Forbes
Why Small Cap Stocks Are Ready For A Rebound
Miles Lewis, manager of the Royce Small Cap Total Return Fund, makes the case that at a time of turbulence in the economy, his quirky collection of small companies is equipped to beat the big names. Miles Lewis by Alexander Karnyukhin for Forbes Tariffs. Inflation. Economic chaos. Bring it on, says Miles Lewis, manager of a portfolio of quirky stocks that, he says, are better equipped than the average stock to weather a tumultuous time in the U.S. economy. Recession? That should send shoppers for sporting goods out of high-class vendors to the down-market chain he favors. Rising interest rates? A steeper yield curve would benefit the venerable savings bank in which Lewis has a stake. Economic uncertainty? That will make it hard for municipalities to sell bonds, so they will be patronizing a bond insurer he likes. Lewis runs $1.5 billion, most of it in the Royce Small-Cap Total Return Fund. A story goes with each of the fund's 60 stocks, but there's also a big-picture bullish case. Small companies are more domestically oriented than the multinationals in the S&P 500. 'They're more insulated from retaliatory tariffs and deglobalization,' Lewis says. Another tailwind might come from the fact that stocks like the ones Lewis holds are overdue for a rebound. In the 16 years since the financial crisis, Wall Street's winners have been big growth companies. The money management firm created 53 years ago by Charles Royce is in the opposite corner of the market. The companies in Small-Cap Total Return average a market value a thousandfold smaller than that of Apple. They are cheap, too, trading at a collective 13 times trailing earnings, to 21 for the S&P (both calculations omit companies losing money). It would be better for Lewis if his stocks weren't quite so cheap. Like most of what's in the Royce line-up, his fund can, net of its 1.2% annual fee, boast of benchmark-beating returns since inception (for this fund, in 1993). But that's not good enough. When investors compare the results not to an index of small value stocks but to the S&P 500 they feel they are missing out. In every year of the past decade, Morningstar reports, Royce mutual funds have seen more assets depart than arrive. It's normal, Lewis says, for big stocks to enjoy a decade or so of outperformance, followed by a decade of reversal. But the current tilt to big growth is at a statistical extreme. Calculate this ratio: the collective value of the market's five most valuable companies (Microsoft, Apple, et cetera) to the collective value of the 2,000 companies in the Russell 2000. A decade ago that ratio hovered just above 1 to 1. Now it's just shy of 5 to 1. Perhaps this will be the year when the little stocks break the spell. A disruption in international trade can't be good for Apple, given its entanglement with China in both manufacturing and sales. It shouldn't bother UFP Industries, a Michigan firm and Lewis pick that makes pallets for domestic factories. Anti-American sentiment won't hurt International General Insurance Holdings. This obscure Jordanian company underwrites weird risks in weird places (recent claim: loss from cancellation of a rock concert in Venice after the lead singer inhaled smoke from a fire at a gig in Paris). International General is the fund's largest holding. There is a plausible story and, so far, some wishful thinking, behind Academy Sports & Outdoors. This retail chain is a poor man's Dick's Sporting Goods. Lewis figures that a weak economy and tariff-driven price increases at both companies will force shoppers to trade down. His position is underwater but he's hanging on. The case for this contrarian bet is all the stronger now that Academy's price-to-earnings multiple is half that of Dick's. Value investors prefer companies trading at low multiples of earnings or net worth. Alas, cheap stocks have flaws. Lewis holds Advance Auto Parts, which looks pathetic alongside AutoZone. They both may have to raise prices to cope with tariffs but they both will probably benefit as impecunious drivers keep clunkers on the road. AutoZone coins money. Advance is in the red. The flawed retailer is priced, in relation to revenue, at a tenth of AutoZone. Lewis describes it as 'a bad house on a great block.' Somebody will fix it up. The flaw at Hingham Institution for Savings, founded in 1834, is its outmoded business model of borrowing short (with deposits) and lending long (commercial mortgages). When the yield curve inverted two years ago, earnings tanked, the stock crashed and Lewis got in. He was willing to overlook the earnings blip. The family running this bank has boosted its book value per share 27-fold in 32 years. Assured Guaranty is in the business of backstopping disappointingly rated issues of municipal bonds that would otherwise have trouble finding buyers. Its flaw is a subpar return on equity, and Wall Street punishes the company with a share price 23% below book value. The insurer has turned that problem into a benefit by using its ample cash flow to repurchase stock at below book. 'It's a share cannibal,' Lewis says. Assured has, in the past decade, cut shares outstanding by 63% and increased book value per share by 152%. The bond insurance play takes Lewis full circle. After graduating from William & Mary College he went to work at MBIA, the biggest bond insurer at the time. His job, which took him back to his native New Orleans, was working out problems at municipal entities distressed by Hurricane Katrina. Soon enough MBIA was itself in distress. Its stock collapsed 97%. Lewis, now 46, escaped to get a business degree at Cornell and took a job researching small-company stocks for American Century, starting in Kansas City, Missouri. A winning record at that fund vendor landed him a job five years ago in Manhattan at Royce Investment Partners, now majority-owned by Franklin Templeton. (Founder Charles Royce, 85, stopped managing money but remains a kibitzer.) Besides the dry spell in small value stocks, Lewis and his colleagues have this to contend with: Index funds are now the rage. He concedes that passive investing is hard to beat in large-cap investing. How easy is it to outsmart the market on Apple, when 53 analysts cover it? But he is not willing to give any ground to indexers with a stock like Hingham, which has zero analyst coverage. Speaking for the remnants of active management in small cap, he says: 'We're the last man standing.'
