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Small Caps On Top Again

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The small-cap Russell 2000 Index made a comeback in 2006 with a gain of 18.4%, outperforming the large-cap Russell 1000 Index (15.5%) for the seventh year out of the past eight. “Every time the large-cap segment picked up some momentum in performance relative to small caps in 2006, it didn’t last long,” says Russell Investment Group’s David Hintz, senior manager and research analyst, in announcing the final performance numbers for the year.

Within the Russell 2000, the technology sector (14.1%) and healthcare sector (9.2%) fared well in 2006, but consumer staples (32.2%) and materials and processing (31.2%) performed better. However, 56% of the stocks in the Russell 2000 gained in the month of December with one technology firm–Redback Neworks (69.4%)–in the lead. In the Russell 1000, 57% of the stocks gained value in December, including 33 stocks that increased more than 10% for the month. According to Hintz, the best performing sectors in the Russell 3000 were integrated oils (34.6%) and utilities (30.5%).

A slightly positive month for equity returns in December drove the Russell 3000 Index to a year-to-date increase of 15.7% and the Russell 2000 Value Index to a 23.5% gain for the year. Value stocks at each capitalization tier fared better than their growth counterparts by notable margins.