Legg Mason's Hench: Is there still value in US small caps?

GDP growth has been sluggish, so there has been a premium for companies that have improved margins in the US, expanded their business, spun off non-performing assets or segments, cut costs, etc, while still operating at a high level.

These kinds of moves have captured a lot of attention from investors because of the current slow-growth environment. Based on this, we have  moved away from a few of the industries that were a major part of our focus over the last year or two, such as housing and non-residential construction because prices have risen since we began to build our positions in those industries. With the big move in the Russell 2000 since February, we have also been a lot more selective because small-caps are not nearly as cheap as they were last year or earlier this year. What really matters about Fed...