Another summer of lousy news, great buying opportunities

Anyone who's hoping this summer will not provide a repeat of last year's market volatility is probably going to be disappointed. In fact, summer 2012 may look like a rerun of summer 2011, thanks to the same gloomy eurozone and fiscal news that are sure to be another summer fixture. As if that's not enough to roil stocks, it also happens to be an election year. The silver lining just may be the volatility. It does create opportunities for long-term investors, said Chris Retzler, portfolio manager of the Needham Small Cap Growth Fund Ticker:(NESGX). “It looks like another summer of great opportunities,” he said. In his four-plus years of managing the fund, Mr. Retzler has done a good job finding opportunities. Since he took over as portfolio manager in January 2008, his fund has generated a total return of 39%, versus a 13% return for the average small-cap-growth fund, according to Morningstar Inc. But even with his experience, Mr. Retzler said he was still able to learn a few tricks from last summer that should help make him out this time around. “We've got more shorts and more cash going into it this year,” he said. The fund can go up to 20% short, and right now, it's as close to that threshold as it's been. It likely would have been higher in 2008 if there hadn't been restrictions on shorting, he said. The fund is also holding more than 20% cash today, which it built up by selling stocks near 52-week highs back in February so it could be ready to pounce on any opportunities the volatility does create. “You have to be willing to be more nimble and more reactive to quarterly swings in the market today. Stocks are moving in three- to six-month cycles,” Mr Retzler said. The sector he is finding the most opportunities in is technology, which has been able to boost sales in a slow-growth environment. The fund had a 64% weighting to tech, more than double the average small-cap-growth fund's 25% allocation, according to Morningstar.