Not All Is What It Seems in Small Cap

The recent launch of the Polen U.S. Small Company Growth Portfolio has afforded us the opportunity to explore recent trends that are unfolding among smaller capitalization businesses. We find that a disproportionately large number of companies in the small cap space are currently unprofitable, a development we find odd at this point in the economic cycle. The high level of unprofitable businesses appears to have implications for valuations as well as investment returns, as we believe the longer-term correlation between profitability and total return is quite clear.

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