If the last five months seem eerily familiar, it may be because we've seen it - with stunning similarity - before, at least in terms of market cap and style performance. Even the calendar date of the likely (never say never) market bottom was effectively the same as the one we saw in March, 2003. More importantly, if the March, 2009 low was indeed the market bottom, it begs the theory that there are some important nuances that played out during that bull market that we should be aware of and respond to. The money you make or save may be surprising.

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Method to the Madness
Many investors are firm believers in sector rotation, but I'm equally a fan of market cap and style rotation. That's simply the practice of overweighting the market's stronger areas while avoiding the weaker ones. Not worth the trouble? The numbers may say otherwise.

Take a look at how small, mid and large caps from both the value and growth style camp performed during the prior bull market, using the iShares ETFs as test subjects, which aren't perfectly-matched to the actual indices, but very close. It began on March 12, 2003, and ended on July 17, 2007.

Cap/Style ETF % Gain from 3/12/03-8/27/03 % Gain from 3/12/03-7/17/07
iShares Small Cap Value (NYSE:IJS) 41% 159%
iShares Small Cap Growth (NYSE:IJT) 36% 146%
iShares Mid Cap Value (NYSE:IJJ) 33% 150%
iShares Mid Cap Growth (NYSE:IJK) 31% 123%
iShares Large Cap Value (NYSE:IVE) 29% 120%
iShares Large Cap Growth (NYSE:IVW) 20% 68%

When the best-performing cap/style ETF more than doubles up the weakest one, it's worth the trouble, even factoring in (or out) the dividends that are more likely to be part of a value holding.

Déjà Vu All Over Again
Of course, those results are history, so they don't mean much to us right now, right? Take a look at the same table again, only this time we'll start the clock at what's apt to be the beginning of the current bull market - the March 9 low.

Cap/Style ETF % Gain from 3/9/09-8/27/09 % Gain from 3/9/09-???
iShares Small Cap Value (IJS) 61% ???
iShares Small Cap Growth (IJT) 57% ???
iShares Mid Cap Value (IJJ) 56% ???
iShares Mid Cap Growth (IJK) 51% ???
iShares Large Cap Value (IVE) 50% ???
iShares Large Cap Growth (IVW) 37% ???

While the overall numbers are better across the board, the ranking from best to worst is identical.

Not many people would be surprised to see small caps top the list in both cases, though growth would probably be expected to edge out its small cap counterpart in the early stages of a new bull market. The eye-opener is clearly the significant lag in large cap growth.

Were it one time, or just for a small portion of the time frame, it might be dismissable. However, to see things shape up in the first five months of this bullish phase the way they did back in the first five months of the '03 bull market forces me to wonder if big growth companies - or at least their stocks - just fundamentally have too much working against them relative to every other group.

In any case, it certainly strikes a blow against the argument for total diversification.

The Bottom Line
Though small caps and value stocks were and are "where it's at," it would be wrong not to mention that the micro caps actually have been outperforming every other style and cap group since March's low, as they did in 2003. The Dow Jones Select Micro Cap ETF (NYSE:FDM) is a pretty good proxy for that segment of the market. (For more, check out the Forbes Financial Round Table: Growth vs. Value Investing.)

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