‘Incredible’ gap between small and micro caps stocks

micro-cap/Small-caps/Spheria/Marcus-Burns/FE-Analytics/

2 August 2019
| By Laura Dew |
image
image
expand image

A ‘significant value opportunity’ exists for micro-cap investors as the gap widens between them and small-cap stocks, according to Spheria.

Speaking at the Pinnacle Investment Summit in Sydney, Spheria portfolio manager Marcus Burns said the gap between the two sectors had been getting wider over the last 12 months.

The firm runs both an Australian Smaller Companies fund and an Australian Microcap fund and the smaller companies fund has significantly outperformed its micro-cap equivalent over one year.

The Australian Smaller Companies has returned 6.25 per cent over one year to 31 July, according to FE Analytics, which was in line with the ACS Equity- Australian Small/Mid Cap sector. However, the Australian Microcap fund lost 0.28 per cent.

 “There is dramatic underperformance of microcaps, those stocks under $500 million. If you look over 10 years at the performance of micro and small caps then they tend to trend in line with a similar outcome. But over the last 12 months, the gap between them has opened up dramatically and are now trading at a 12-13 per cent discount to small caps,” he said.

In order to take advantage of this opening, Burns said the firm had been rotating away from small caps and into the micro end of the market instead.

“We think this is an incredible opportunity so we have been shifting some of our funds to micro-cap space to take advantage of this underperformance.”

He highlighted stocks such as Libra, Mortgage Choice and City Chic Collective as those which had done well for the firm.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months 3 weeks ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months 3 weeks ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months 3 weeks ago

ASIC has suspended the Australian Financial Services Licence of a Melbourne-based financial advice firm....

1 week 4 days ago

The corporate regulator has issued infringement notices to three AFSLs whose financial advisers provided personal advice to a retail client while unregistered....

2 weeks 2 days ago

ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test....

3 weeks ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND