Now it’s time for small-cap stocks to get in their big innings.

After small-cap stocks were beat up in a market correction earlier this fall, it’s a good time for value investing, with lots of bargains now available.

That’s what two Delaware Investments portfolio managers, Christopher Beck and Francis Morris, said at a Manhattan luncheon meeting on Wednesday.

The investing environment -- an economy growing gradually, with interest rates expected to slowly rise and with neither high inflation rates nor a recession on the horizon -- is a good one for small-cap investing.

“Small caps don’t do well in recessions,” said Beck, Delaware’s chief investment officer of small- and mid-cap value equity, who runs the Delaware Small Cap Value Fund. In part, the reason is that small-cap investing is often a bet on the American economy. Some 97 percent of the Delaware Small Cap Value Fund was recently invested in domestic equities. But small caps, earlier this year, were pricey, he and Morris said.

“We came into this year, frankly, with valuations that were fairly high and that caused us some concern,” noted Morris, one of Delaware’s chief investment officers, who runs the firm’s Small Cap Core Fund.

By this fall, the market started to correct small-cap stocks, and Delaware funds were feeling it.

For example, Delaware Small Cap Value’s Class A fund shares lost 5.29 percent in the third quarter.

And recently, for the year, large cap has outperformed small-cap stocks by some 10 percent, Morris noted. The sister Small Cap Core Fund was also hammered in the third quarter; its Class A shares lost 5.36 percent. It was down about 1 percent for the year through the third quarter.

But Morris said this small-cap drubbing “has corrected a lot of the imbalance from an evaluation standpoint. So that makes us much more attractive than we were from an evaluation viewpoint a year ago at this time.”

Beck adds, “Whatever recent period you want to pick, the market has corrected on the order of 10 to 12 percent. And that has helped the valuation a lot.” That has made small caps a bargain versus large-cap stock and has also improved “on an absolute basis,” he adds.

The Delaware Small Cap Value Fund, a $2.6 billion fund, recently had a P/E ratio of 14.27. The Delaware Small Cap Core Fund is a $336 million fund with a recent P/E ratio of 17.83.

Those numbers have come down, but they are still high historically, Morris said. Nevertheless, he believes that small caps are now more reasonably priced. Beck said there has been a 6 percent rally in small-cap stock value recently and more is coming.

Where?

Beck and Morris said they now see opportunities in consumer discretionary, finance and energy stocks. The last were hit very hard, he said.

“In the energy area, there has been tremendous carnage,” Morris said, “especially in some of these smaller shale plays. Some are down 35 percent in the month of September alone. And that has created opportunity.”

He explained that, after several years of underperformance, some consumer stocks are primed for gains.

Neither manager would name the specific companies they are purchasing. However, both funds, in recent reports, were heavy on finance and technology companies. Among their recent favorites are Synopsys, XPO Logistics, Helix Energy Solutions Group, Proofpoint Inc. and East West Bancorp.

Morris also predicted that M&A activity is also ready to pop.

“And there’s plenty of capital out there,” Morris said, “either with corporations that are flush with cash in their balance sheets, or private equity firms looking at mergers and acquisitions.”