Given the market's high volatility of late, it may be an ideal time for small-cap investors to consider the Royce Global Value Fund (MUTF:RIVFX) — a small-cap fund with a focus on global opportunities within the framework of value-oriented investing.

Royce Global is the latest featured recommendation from Mark Salzinger in his No-Load Fund Investor newsletter.

"We continually search for new funds from experienced, successful managers. Such funds benefit from superior guidance and flexibility, and thus have a better than average chance of besting their peers." According to Salzinger, Royce Global Value is "one such fund."

Formerly known as Royce International Value from its late 2006 inception until early 2008, Royce Global has about $30 million in assets.

"The small-cap value approach [in Royce Global] attracts us greatly in this case, simply because it is so rare for an international or global fund," says Salzinger, pointing out that most international stock funds are oriented toward large caps. Further, of the small-cap international funds that do exist, most gravitate toward growth stocks.

"Despite the U.S. fund industry's apparent lock of interest in foreign small-cap value stocks, the style offers considerable potential for above-average returns over the long run," he says, noting that despite cyclical downturns, small-cap value in the United States has produced superior returns versus other investment styles over . . .

On Thursday, we examined why the oil sector will be one of the most profitable sectors to round out 2008, and gained insight from Jason Votruba, vice president and co-portfolio manager of the UMB Scout Small Cap Fund, and Richard Wyman, vice president and senior oil and gas analyst at Canaccord Adams. Today, Votruba and Wyman name their favorite small-cap oil and gas stock picks.

Wyman favors oil and gas companies with an established land position, which he calls “scalable repeatable growth opportunity.” The analyst has “buy” ratings on ProEx Energy Ltd. (TSX:PXE), a natural gas unconventional player; Pearl Exploration and Production Ltd. (TSV:PXX), a heavy oil player; and Sterling Resources (TSV:SLG), an exploration and production company drilling in the U.K. sector of the North Sea and Romania. Wyman said Sterling is a bit riskier, but has an active drilling program.

Votruba is overweight energy in his portfolio, with energy comprising 20% to 25% of the fund manager’s diversified small-cap fund. This compares with the Russell 2000 (NYSE:IWM), for which energy composes 7%.

Among small-cap oil and gas companies, Votruba recommended oil and gas exploration and production company Swift Energy Company (NYSE:SFY). “[It’s] probably one of my favorite picks right now in the E&P. I see it as more of a lower risk play. It’s involved in lower-risk development, and not doing a lot of wild-cat exploration; it’s on their existing properties.” 

Swift Energy has had its obstacles. Investors rebuked the company in the past after management decided to commence operations in New Zealand — a move that boded poorly in retrospect. Management lost credibility with investors as a result, but Votruba thinks the company’s back on track. According to Votruba, Swift Energy has now surpassed both Chevron (NYSE:CVX) and Texaco as the largest oil producer in Louisiana.

However, the company did see production fall in the first quarter on account of production issues. Specifically, Swift began producing new wells that were shut down after pressure issues arose in a handful of the pipelines, which could cause damage to the oil wells.  But Votruba says he’s confident Swift will be able to get its wells operating again in 60 to 90 days, and thinks production will climb 30% in the . . .

With the onset of a warming trend in the market, small caps may once again be the best place to park your money, according to a May 31 article in The Wall Street Journal.

Although investors are usually drawn to the safety of large caps during the worst of economic times (especially within the last two years), sentiment has recently changed now that the bear market looks to be over. Small caps have pulled ahead of their large-cap brethren, up 4.2% in May compared with 1.6% for the Russell 1000, according to the article, titled “In a Rebound, Small-Cap is Beautiful.”

If the past is any indication of the future, it looks like small-cap issues are on the road to recovery as they not only tend to outdo large caps by a decent margin during a market rebound, but their strong endurance usually lasts for several years after, the article said.

According to Ned Davis Research Inc., since 1979 the Russell 2000 (NYSE:IWM) has returned a median 19.6% in the first three months after a market bottom, versus 13.6% for the Russell 1000. After the 2002 bear market ended, for example, small caps dominated for three straight years.

But why exactly do the little guys tend to come out on top after a darker economic period? A myriad of factors come into play, but the article essentially said it's because small caps are usually unglamorous (meaning they are undervalued), their post-downturn profit bouncebacks have a larger impact than at big companies, and they are more nimble and take quicker advantage of a better economy.
 
Steven DeSanctis, small-cap strategist at Merrill Lynch, was quoted as naming companies with international exposure as the best investments when coming out of a downturn. In the first quarter, small caps that possessed this bargaining chip rose 13%, while their competition that played in a more domestic field were down 10%.

Health care was mentioned as a sector with high profit potential, due to its tendency to be mostly unaffected by economic cycles. Small-cap tech plays could also be promising, as DeSanctis said that tech did well in the 1990 to 1991 downturn, but failed to bounce back from the 2000 to 2002 bear market only because the sector was still recuperating from the pop of the late-90s’ bubble. He pointed out that foreign exposure for U.S. tech companies is strong.

Investors should keep in mind that small caps are already getting costlier, the story said, partly because of their recent modest rally; the small-cap index trades at 18 times trailing earnings, while the large-cap benchmark is at 16.5 times. Another caveat could be that if severe inflation returns, DeSanctis said, small caps suffer the most as small companies have fewer resources to deal with increasing costs.

Neverthless, surgical instrument maker Conmed Corp. (Nasdaq:CNMD) was named as a promising small cap in the health-care sector. Half of the company’s revenue comes from international sales, and although restructuring has hurt margins, causing it to trade at a high-end 18 times earnings, Conmed has cut debt and is seeing double-digit revenue growth.

Within the tech sector, The Wall Street Journal named cell phone distributor Brightpoint Inc. (Nasdaq:CELL), whose stock is changing hands at 15 times earnings. "They have a 10% global market share," said Chris Guinther, manager of RidgeWorth Small Cap Growth Fund, in the story.

Jim Lowell, editor of The Fidelity Investor and Fidelity Sector Investor, has long been known as the advisory world’s leading independent authority on the Fidelity family of funds. In recent years, he has expanding this role to include other fund families as well as exchange-traded funds covered in his Forbes ETF Advisor.

Below, we examine his general outlook for the small-cap sector, his favorite small-cap funds within the Fidelity family and his review of the top five small-cap ETFs.

“For the past three years, small- and mid-cap stocks have been told their numbers were up; that they’d come too far from the low water mark of the most recent 2002 bear market trough to make a sustainable run,” Lowell says. “While those who were making this claim three years ago are looking as if they’ve been justified by the past three months worth of activity, the performance reality is that all capitalization ranges faltered at the altar of this recession.”

He says it’s true that small- and mid-caps lost a bit more than the so-called “safe haven large-cap brethren,” and over the next three months they may follow a similar pattern, but “over the next 12 months, and certainly for years to come, most investors (especially growth-oriented ones) can benefit from holding meaningful stakes in both camps.”

The advisor says that these benefits are especially true if one holds their small- and mid-cap stakes as part of a broader asset allocation position that also includes diversification, both globally and by capitalization.

 “Small- and mid-cap companies offer benefits beyond the prospect for faster earnings growth rates,” Lowell says. “They’re often companies with a consumer base no more than a stone’s throw from their service or registers. Innovation is part of their élan.”

He adds that when selecting small-cap funds, he personally favors managers who focus on “real products, proven management and established revenue,” . . .

We are small-cap growth investors, so when I talk about small-cap stocks I am really focusing on small-cap growth stocks. [This year] seems to me to have a lot of similarities to 1990; that was a year where small stocks declined in the first half of the year over concerns regarding the bank crisis and the economy, and then recovered as it became clear that the bank crisis, while difficult, was being handled, and the economy had entered a short (two quarter) and relatively mild recession. I believe, given the recent actions by the Fed and the regulators, that the financial issues that currently confront us today will also turn out to be manageable — by that I mean they will not plunge us into a depression or a severe recession — and while it appears we are in a recession, I believe it will be reasonably short and mild. However, also like the 1990s, the effects of the financial crisis will cause economic growth to be quite mild for many years forward; this will cause the market, I believe, to put a premium on those companies that can deliver earnings growth.

Smaller companies tend to be less liquid as trading vehicles than larger companies and mid-sized companies, as they have fewer shares outstanding. They also can be more volatile over short-time horizons, for the same reason. However, in part because of their smaller size and fewer shares outstanding, they have the potential to grow earnings at a faster rate than larger companies. I would also say that, in my experience, management has a bigger impact, either positive or negative, on . . .

There are over 5,000 companies that meet our definition of small cap (companies under $2 billion in capitalization), thus it is really hard to make generalizations [concerning the corporate earnings outlook]. We are still finding companies that have bright prospects for earnings growth in 2008 and beyond, because they have strong product cycles, really differentiated products, have made an acquisition that is strategically significant, or some other event. I believe that in all but the most severe recessions, the future of a small company rests . . .

BIDZ.com, Inc. (Nasdaq: BIDZ), China Finance Online Co. (Nasdaq: JRJC) and Genesco Inc. (NYSE: GCO) are among the biggest percentage losers in Tuesday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage losers:

AspenBio Pharma, Inc. (Nasdaq: APPY), Datawatch Corp. (Nasdaq: DWCH) and WCA Waste Corp. (Nasdaq: WCAA) are among the biggest percentage gainers in Tuesday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage gainers:

BIDZ.com, Inc. (Nasdaq: BIDZ), Hoku Scientific, Inc. (Nasdaq: HOKU) and Canadian Solar Inc. (Nasdaq: CSIQ) are among the most actively traded companies in Tuesday pre-market trading among those with market capitalizations under $750 million:

Simulations Plus, Inc. (AMEX: SLP), Santander BanCorp (NYSE: SBP) and Medivation, Inc. (Nasdaq: MDVN) are among the biggest percentage losers in Monday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage losers:

Hoku Scientific, Inc. (Nasdaq: HOKU), SRI/Surgical Express, Inc. (Nasdaq: STRC) and U.S. Shipping Partners L.P. (NYSE: USS) are among the biggest percentage gainers in Monday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage gainers:

Ceragon Networks Ltd. (Nasdaq: CRNT), Incyte Corp. (Nasdaq: INCY) and Online Resources Corp. (Nasdaq: ORCC) are among the most actively traded companies in Monday pre-market trading among those with market capitalizations under $750 million:

BIDZ.com, Inc. (Nasdaq: BIDZ), General Moly, Inc. (AMEX: GMO) and Key Technology, Inc. (Nasdaq: KTEC) were among the new 52-week highs established Tuesday among companies with market capitalizations or values under $750 million.

Here are today's 52-week small-cap highs:

Penwest Pharmaceuticals (Nasdaq: PPCO), Qiao Xing Universal Telephone, Inc. (Nasdaq: XING) and BluePhoenix Solutions, Ltd. (Nasdaq: BPHX) are among the most actively traded companies in Tuesday pre-market trading among those with market capitalizations under $750 million:

Chyron Corp. (AMEX: CGS), Oil-Dri Corporation of America (NYSE: ODC) and Astronics Corp. (Nasdaq: ATRO) were among the new 52-week highs established Monday among companies with market capitalizations or values under $750 million.

Here are today's 52-week small-cap highs:

Genesco Inc. (NYSE: GCO), Franklin Bank Corp. (Nasdaq: FBTX) and Universal Security Instruments, Inc. (AMEX: UUU) were among the new 52-week lows established Monday among companies with market capitalizations or values under $750 million.

Here are today's 52-week small-cap lows:

Genesco Inc. (NYSE: GCO), HSW International, Inc. (Nasdaq: HSWI) and Hardinge Inc. (Nasdaq: HDNG) are among the biggest percentage losers in Monday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage losers:

The Aristotle Corp. (Nasdaq: ARTL), Transcat, Inc. (Nasdaq: TRNS) and Hastings Entertainment, Inc. (Nasdaq: HAST) are among the biggest percentage gainers in Monday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage gainers:

Jones Soda Co. (Nasdaq: JSDA), Origin Agritech Ltd. (Nasdaq: SEED) and Sify Technologies Ltd. (Nasdaq: SIFY) are among the most actively traded companies in Monday pre-market trading among those with market capitalizations under $750 million:

Canadian Solar Inc. (Nasdaq: CSIQ), Local.com Corp. (Nasdaq: LOCM) and China Techfaith Wireless Comm. Tech. Ltd. (Nasdaq: CNTF) are among the most actively traded companies in Friday pre-market trading among those with market capitalizations under $750 million:

RGC Resources Inc. (Nasdaq: RGCO), Bio-Imaging Technologies, Inc. (Nasdaq: BITI) and eDiets.com Inc. (Nasdaq: DIET) were among the new 52-week highs established Thursday among companies with market capitalizations or values under $750 million.

Here are today's 52-week small-cap highs:

Universal Security Instruments, Inc. (AMEX: UUU), Tefron Ltd. (NYSE: TFR) and CPI Corp. (NYSE: CPY) were among the new 52-week lows established Thursday among companies with market capitalizations or values under $750 million.

Here are today's 52-week small-cap lows:

Simclar, Inc. (Nasdaq: SIMC), China Shenghuo Pharmaceutical Hldg, Inc. (AMEX: KUN) and Lifeway Foods, Inc. (Nasdaq: LWAY) are among the biggest percentage losers in Thursday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage losers:

Arena Pharmaceuticals, Inc. (Nasdaq: ARNA), Calumet Specialty Products Partners, L.P. (Nasdaq: CLMT) and Telestone Technologies Corp. (Nasdaq: TSTC) are among the most actively traded companies in Thursday pre-market trading among those with market capitalizations under $750 million:

Innodata Isogen, Inc. (Nasdaq: INOD), Greater Community Bancorp (Nasdaq: GFLS) and RGC Resources Inc. (Nasdaq: RGCO) were among the new 52-week highs established Wednesday among companies with market capitalizations or values under $750 million.

Here are today's 52-week small-cap highs:

TravelCenters of America LLC (AMEX: TA), Dayton Superior Corp. (Nasdaq: DSUP) and Emergent BioSolutions Inc. (NYSE: EBS) were among the new 52-week lows established Wednesday among companies with market capitalizations or values under $750 million.

Here are today's 52-week small-cap lows:

Kreisler Manufacturing (Nasdaq: KRSL), Basin Water, Inc. (Nasdaq: BWTR) and TravelCenters of America LLC (AMEX: TA) are among the biggest percentage losers in Wednesday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage losers:

Innodata Isogen, Inc. (Nasdaq: INOD), Canadian Solar Inc. (Nasdaq: CSIQ) and Greater Community Bancorp (Nasdaq: GFLS) are among the biggest percentage gainers in Wednesday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage gainers:

Canadian Solar Inc. (Nasdaq: CSIQ), CDC Corp. (Nasdaq: CHINA) and China Finance Online Co. (Nasdaq: JRJC) are among the most actively traded companies in Wednesday pre-market trading among those with market capitalizations under $750 million:

TravelCenters of America LLC (AMEX: TA), The First Bancshares, Inc. (Nasdaq: FBMS) and Endwave Corp. (Nasdaq: ENWV) were among the new 52-week lows established Tuesday among companies with market capitalizations or values under $750 million.

Here are today's 52-week small-cap lows:

TravelCenters of America LLC (AMEX: TA), The First Bancshares, Inc. (Nasdaq: FBMS) and Akeena Solar, Inc. (Nasdaq: AKNS) are among the biggest percentage losers in Tuesday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage losers:

Triad Guaranty Inc. (Nasdaq: TGIC), Silicom Ltd. (Nasdaq: SILC) and Ambassadors International, Inc. (Nasdaq: AMIE) are among the biggest percentage gainers in Tuesday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage gainers:

The Pantry, Inc. (Nasdaq: PTRY), China Finance Online Co. (Nasdaq: JRJC) and Nektar Therapeutics (Nasdaq: NKTR) are among the most actively traded companies in Tuesday pre-market trading among those with market capitalizations under $750 million:

Golden Cycle Gold Corp. (Nasdaq: GCGC), Argan, Inc. (AMEX: AGX) and RGC Resources Inc. (Nasdaq: RGCO) were among the new 52-week highs established Monday among companies with market capitalizations or values under $750 million.

Here are today's 52-week small-cap highs:

Brooke Corp. (Nasdaq: BXXX), PlanetOut, Inc. (Nasdaq: LGBT) and West Coast Bancorp (Nasdaq: WCBO) were among the new 52-week lows established Monday among companies with market capitalizations or values under $750 million.

Here are today's 52-week small-cap lows:

Basin Water, Inc. (Nasdaq: BWTR), Virco Manufacturing Corp. (Nasdaq: VIRC) and Quebecor World Inc. (NYSE: IQW) are among the biggest percentage losers in Monday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage losers:

RAM Holdings Ltd. (Nasdaq: RAMR), Globecomm Systems, Inc. (Nasdaq: GCOM) and Community Financial Corp. (Nasdaq: CFFC) are among the biggest percentage gainers in Monday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage gainers:

ShengdaTech, Inc. (Nasdaq: SDTH), Ascent Solar Technologies, Inc. (Nasdaq: ASTI) and GPC Biotech AG (Nasdaq: GPCB) are among the most actively traded companies in Monday pre-market trading among those with market capitalizations under $750 million:

AMCON Distributing Co. (AMEX: DIT), Hutchinson Technology Inc. (Nasdaq: HTCH) and GSE Systems, Inc. (AMEX: GVP) were among the new 52-week highs established Thursday among companies with market capitalizations or values under $750 million.

Here are today's 52-week small-cap highs:

Atlantic BancGroup, Inc. (Nasdaq: ATBC), HFF, Inc. (NYSE: HF) and Jones Soda Co. (Nasdaq: JSDA) were among the new 52-week lows established Thursday among companies with market capitalizations or values under $750 million.

Here are today's 52-week small-cap lows:

Home Diagnostics, Inc. (Nasdaq: HDIX), Community Financial Corp. (Nasdaq: CFFC) and World Fuel Services Corp. (NYSE: INT) are among the biggest percentage losers in Friday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage losers:

AMCON Distributing Co. (AMEX: DIT), AMEN Properties, Inc. (Nasdaq: AMEN) and Hutchinson Technology Inc. (Nasdaq: HTCH) are among the biggest percentage gainers in Friday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage gainers:

CEVA, Inc. (Nasdaq: CEVA), EMS Technologies, Inc. (Nasdaq: ELMG) and Ebix, Inc. (Nasdaq: EBIX) were among the new 52-week highs established Thursday among companies with market capitalizations or values under $750 million.

Here are today's 52-week small-cap highs:

Hardinge Inc. (Nasdaq: HDNG), Kenexa Corp. (Nasdaq: KNXA) and National Atlantic Holdings Corp. (Nasdaq: NAHC) are among the biggest percentage losers in Thursday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage losers:

Restoration Hardware, Inc. (Nasdaq: RSTO), AeroCentury Corp. (AMEX: ACY) and Amcon Distributing Co. (AMEX: DIT) are among the biggest percentage gainers in Thursday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage gainers:

Ceragon Networks Ltd. (Nasdaq: CRNT), ABX Air, Inc. (Nasdaq: ABXA) and China Sunergy Co., Ltd. (Nasdaq: CSUN) are among the most actively traded companies in Thursday pre-market trading among those with market capitalizations under $750 million:

Mercantile Bancorp, Inc. (AMEX: MBR), Website Pros, Inc. (Nasdaq: WSPI) and Ebix, Inc. (Nasdaq: EBIX) were among the new 52-week highs established Wednesday among companies with market capitalizations or values under $750 million.

Here are today's 52-week small-cap highs:

CompuCredit Corp. (Nasdaq: CCRT), Carmike Cinemas, Inc. (Nasdaq: CKEC) and Ambassadors International, Inc. (Nasdaq: AMIE) were among the new 52-week lows established Wednesday among companies with market capitalizations or values under $750 million.

Here are today's 52-week small-cap lows:

Nastech Pharmaceutical Co. Inc. (Nasdaq: NSTK), MasTec, Inc. (NYSE: MTZ) and Industrial Services of America, Inc. (Nasdaq: IDSA) are among the biggest percentage losers in Wednesday's trading among companies with market capitalizations under $500 million.

Here are today's biggest percentage losers:

GPC Biotech AG (Nasdaq: GPCB), Optelecom-NKF, Inc. (Nasdaq: OPTC) and PeopleSupport, Inc. (Nasdaq: PSPT) are among the biggest percentage gainers in Wednesday's trading among companies with market capitalizations under $500 million.

Here are today's biggest percentage gainers:

Euroseas Ltd. (Nasdaq: ESEA), Insulet Corp. (Nasdaq: PODD) and Nastech Pharmaceutical Co. Inc. (Nasdaq: NSTK) are among the most actively traded companies in Wednesday pre-market trading among those with market capitalizations under $750 million: