As Geoff Dailey, Head of the US Equities team, explains in this short video, several tailwinds make this moment a compelling opportunity to invest in US small-cap growth companies.
Geoff notes that small capitalisation stocks have been subject to the biggest market discount versus large caps in decades. There’s a wealth of catalysts that could unlock that value discrepancy: ‘Animal spirits’ have been set loose by the prospect of companies reshoring, deregulation, artificial intelligence developments and the new pro-growth US administration.
The economy is strong and the Federal Reserve is on an easing track. Cheaper money should benefit small caps in particular. In addition, a potentially big year for mergers & acquisitions presents a favourable context. Such a positive setting opens the way for small-cap company earnings growth to accelerate.
BNP Paribas Asset Management’s US small cap strategy focuses on finding idiosyncratic, mispriced stocks of disruptive, market share-gaining companies, while managing risk tightly. Top of our list today are the tech and healthcare sectors where small, innovative growth companies are breaking new ground in AI, automation, cloud computing, robotics, medtech and genetics.
Disclaimer
Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.
