Goldman Sachs sees opportunity in small-cap stocks even as the Russell 2000 is coming off its worst week since early January. Greg Tuorto, manager of the actively managed Goldman Sachs Small Cap Core Equity ETF (GSC), said easing financial conditions should help the group. But his point of view comes with a caveat. “I do think you have to be very selective about small-cap stocks because things can go downhill at a tremendous rate,” he said on CNBC’s “Fast Money” on Thursday. A small-cap portfolio manager suggests looking under the hood of a benchmark small-cap index to identify high-quality companies. As of Friday, FactSet shows Federal Signal Corp., SPX Technologies and Core & Main are his fund’s top holdings. “There’s a lot of stuff in the Russell 2000 that you probably don’t want to own,” he said. “If you look at some of the companies that aren’t necessarily in the larger benchmark, there are a significant number of unprofitable companies. But in that $2 billion to $5 billion range, you may find that some companies can tell the weather themselves. Even with the losing week, the Russell 2000 was up nearly 2% for the year as of Friday’s market close. Meanwhile, Goldman’s exchange-traded fund outperformed the index, rising nearly 8% over the same period. Tuorto says the group is sensitive to interest rates are preparing to catch up ahead of the Federal Reserve’s expected policy easing. “Other financial conditions have eased a little bit, which is also good for small-caps. And I do think a little more clarity on rates will be a good tailwind for the group.” he said. Tuorto believes the semiconductor industry, which Nvidia dominated in 2024, could soon become a testing ground for small-cap companies. He names Cohu and Onto Innovation as his two top candidates in this space. “We think [they] “You need that kind of high-bandwidth memory to make these AI machines hum.” Tuorto also believes that consumer-focused “Stocks in his world could continue to outperform, citing strong consumer spending. He highlighted the strong management profile of Shake Shack restaurants and the recently listed Cava. “The consumer has a lot of choice with their feet in terms of how they’re spending their money,” he said. “We really like the restaurant theme, and Shake Shack and Cava are two companies that are really focused not just on menu but on loyalty, and they’re run by management teams that are very, very effective in real estate. things.”
