Website design By BotEap.comAsk most investors where they are looking to invest these days and most will tell you that some of the best opportunities are here in the good old USA and many of these investors are European. According to Investment News, European pension funds and their equity managers are increasing their exposure to the US, according to pension fund consultants, managers and officers. And the uncertainty surrounding the euro and its impact on euro zone economies is pushing investors more quickly into the arms of Uncle Sam.

Website design By BotEap.comMany investors are especially drawn to small-cap US companies, where valuations are attractive and, according to research published by Furey Research Partners Less than 20% of publicly traded small-cap company revenue comes from outside the US But it’s not just earnings that matter, it’s valuation. Small-cap companies are typically priced in future earnings that can be very sensitive to US GDP growth. This is where a good active manager can really add tremendous value, as a good small-cap manager will look for companies with sustainable growth and have historically shown some resistance to the US economy, such as the utility sector.

Website design By BotEap.comThe other reason to pay attention to US small-caps is that the market may be trying to price another round of Fed QE and love it or hate it, as the old saying “don’t fight against the Fed” really applies to the small-cap space. As in the last two rounds of QE, the Russell 2000 index is up an average of 20% over the next three months and over 40% over the next six months (the Russell 2000 is by far the most common benchmark for mutual funds). which self-identify as “small-cap” while the S&P 500 Index is used primarily for large-cap stocks).

Website design By BotEap.comWhile there are still risks to the US economy, many US companies have amassed an ample supply of cash on their balance sheets, allowing them to boost growth through mergers and acquisitions. According to a Wall Street Journal article dated January 1. An Ernst & Young survey, conducted on February 2, 2012, titled “On Wall Street, Renewed Optimism for Doing Business,” anticipates that “36 percent of companies plan to make an acquisition this year.” With many CEOs of publicly traded companies coming under pressure to increase shareholder value, acquiring a smaller company with higher growth rates and technological innovation seems like a smart way to go.