Register to receive our free weekly newsletter including editorials.
ASX small caps have recently underperformed larger companies and liquidity in these companies has vanished. That provides a chance for enterprising investors to buy fast growing yet cheap small and micro cap stocks.
Global microcaps are a relatively underexplored and misunderstood asset class. They allow diversification from the concentration seen not only in large cap indexes, but the companies held by many active managers.
Many investors focus primarily on the big listed companies but the smaller end in tech, mining and healthcare outperforms through innovation. Many Australian companies are world-leaders in their speciality.
In some parts of the market, the case for active management over passive is strong. The less-researched small companies space shows a focus on strong capital, proven management and a clear strategy pays off.
The Small Ords index is running hot with many winners, but have fundamentals taken a back seat to momentum, unbounded optimism and the fear of missing out on the next big thing?
Over the last two years, small caps have underperformed their large cap rivals in Australia, which goes against the global historical trend. Where has our small cap additional performance gone and will it return?