This week we attended the 40th annual conference of the Florida Public Pension Trustees Association in Orlando. Attendees included municipal pension board members, plan sponsors and administrators. In Monday’s keynote presentation we highlighted various macroeconomic factors investors face today.
While researching for our talk, we came across this interesting fact (tip of the hat to Van Hesser’s Three Things in Credit): “42% of the companies in the Russell 2000 index are unprofitable.” We had to rewind the tape to make sure we hadn’t misheard. Yup, almost half of the smaller companies from the broader Russell index are losing money.
Now it’s fair to ask whether some of these companies are investing for growth, hence cash flow negative, or expenses are simply outpacing revenues. And it would be helpful to compare today’s measure with the last five years to see if higher rates could be the culprit.