Small-Cap Investment Strategy Yields Success for Defiant Fund
In the dynamic world of investment, fund manager David Wagner stands out for his strategic approach, particularly his preference for companies with a "differentiated" approach, such as Carvana (CVNA). This large cap stock has seen significant growth, with recent trading placing Carvana stock at $327.
Wagner's strategy, however, was put to the test during this year's market selloff. While the T. Rowe Price Small-Cap Value Fund (PRSVX) declined by approximately -1.93% year-to-date as of late July, the Russell 2000 Index was down only about -0.08% in the same period. This indicates that PRSVX had a larger negative performance relative to the Russell 2000 during the market weakness.
More specifically, PRSVX's YTD return as of 07/31/2025 was -1.93% compared to the Russell 2000 TR USD’s YTD return of -0.08%. Over shorter periods around the market selloff, PRSVX also showed weaker returns relative to the benchmark. For example, PRSVX's returns in 2025 YTD lagged the Russell 2000 by about 1.85 percentage points.
However, a snapshot later in mid-August 2025 shows a slight recovery for PRSVX, with a YTD return of +1.74%, while the Russell 2000 was up +5.23%. This comparison shows that, during this year's market selloff and recovery, PRSVX underperformed the Russell 2000 Index, returning less and experiencing a more pronounced decline in the downturn portion of the period.
Despite this, Wagner's strategy seems to have paid off in other areas. For instance, he purchased a stake in shoe company Steven Madden (SHOO), which, despite a slim, 1.2% gain for the benchmark over the past 12 months, has recovered 27% since hitting a low in mid-April. Steven Madden, the number-one importer of women's shoes in the country, with a significant portion coming from China, has been a resilient investment for Wagner.
Wagner's strategy during the market's worst days was not confined to the retail sector. He trimmed stakes in utility stocks and real estate investment trusts (REITs) and instead bet on the most economically sensitive and tariff-exposed names. This approach, which included investing in Carvana when it was teetering toward bankruptcy for $30 a share in late 2023, has proven to be a successful long-term play.
Wagner's belief in Carvana's potential is not unfounded. The company has upended the way people buy used cars, according to the fund manager. This belief, coupled with his long-term investment horizon and reluctance to sell stocks arbitrarily when they surpass small-cap measures, has contributed to Wagner's 7.7% annualized return over the past decade, beating 72% of his peers in managing the Small-Cap Value fund.
In the face of potential tariff changes, Wagner is not saying that these are not a problem, but none of this stuff is settled, according to him. He continues to invest in retail and restaurant businesses, as well as materials and chemicals companies with exposure to global trade, demonstrating his confidence in the resilience of these sectors in the face of market volatility.
Despite Wagner's successful long-term investment in Carvana, his strategy was tested during this year's market selloff, with the T. Rowe Price Small-Cap Value Fund (PRSVX) underperforming the Russell 2000 Index. Moreover, Wagner's financial decisions extend beyond the retail sector, as he also focuses on investing in economically sensitive and tariff-exposed names, such as materials and chemicals companies with exposure to global trade.
