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30 June 2022
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Most small cap managers outperformed their benchmark in 2021, with more choice and diversity of companies than the big end of town. Small caps are often overlooked and operate in niches with less competition.
Smaller companies might require more research than large caps but they are often worth it. All large companies were small once and there can be benefits investing in small companies and backing management early.
Some high-quality companies have emerged even stronger since the onset of COVID and are well placed for outperformance. We call these the ‘COVID Opportunists’ as they are now dominating their specific sectors.
Social media, app and trading platforms that drive retail participation also open doors for greater volatility. Ironically, easy money is contributing to market risks, with shorting hit by spiking to the upside.
A high level of spending capacity is left in consumers which will support consumer-related stocks for a longer period than is factored into current share prices. Savers have lots of money sitting in the bank.
Over the last 20 years, smaller Australian listed companies have outperformed larger companies but with greater volatility. Following a strong run in the last six months, the smaller end is looking expensive.
Global equity markets have experienced huge volatility during 2020. Investors are now looking at stretched large cap valuations but there are good opportunities in less well-known, smaller companies.
Financial software companies have favourable attributes and industry tailwinds that may see investors rewarded, especially with super funds driving for greater efficiencies and better member experiences.
Despite the rhetoric from some investors, backing smaller, riskier stocks in the Australian share market will not necessarily give better returns than larger, less volatile stocks.
Australian investors have a domestic bias, but around the world, a swag of small to medium cap companies offer better value than the mega-cap names that have driven markets in recent years.
As heads turn to the hottest tech or niche stock, some companies in traditional business sectors get left behind because they are boring. But overlooked means not overcooked.
Assessing the barriers to entry, formal and informal, is always relevant in investing, but particularly for small cap stocks, where forecast growth can only occur if such barriers persist and grow.
With 62% of Australians aged 65 and over relying at least partially on the age pension, are they better off owning their home or renting? There is an extra pension asset allowance for those not owning a home.
With 700 Australians retiring every day, retirement income solutions are more important than ever. Why do millions of retirees eligible for a more tax-efficient pension account hold money in accumulation?
A fund manager argues it is immoral to deny poor countries access to relatively cheap energy from fossil fuels. Wealthy countries must recognise the transition is a multi-decade challenge and continue to invest.
Equity investing comes with volatility that makes many retirees uncomfortable. A focus on income which is less volatile than share prices, and quality companies delivering robust earnings, offers more reassurance.
At around 10.30pm on Saturday night, Scott Morrison called Anthony Albanese to concede defeat in the 2022 election. As voting continued the next day, it became likely that Labor would reach the magic number of 76 seats to form a majority government.
Using the nine dimensions of well-being used by the OECD, and dividing Australians into Baby Boomers, Generation Xers or Millennials, it is surprisingly easy to identify the winners and losers for most dimensions.