We believe that the current market conditions present a favourable landscape for small and mid-cap stocks. The Forager International Shares Fund holds around 58% of the portfolio in small and mid-cap stocks (as at 31 May 2023). These are all businesses which have a market capitalisation of under US$10Bn.

Here are some key reasons why we believe, that in the current market, exposure to small and mid-cap stocks could be beneficial to Fund performance:


Potential for Outperformance

Small-cap stocks have historically underperformed their larger counterparts leading into recession, which makes their valuations particularly attractive. This is the case right now. Small-caps have also historically outperformed their larger counterparts during and after recessions. There is of course no guarantee that this will happen again, but we believe that current valuations and the existing market climate could present a good opportunity for small-cap stocks

Potential for Market Inefficiencies

The small and mid-cap segment of the market can often be less efficient, creating opportunities for investors. Our experienced team conducts in-depth research to uncover hidden gems and exploit market inefficiencies, which can be particularly present in this type of financial climate.


Underestimated Growth Opportunities

Small and mid-cap stocks typically operate in niche markets or innovative industries. These companies tend to have the flexibility to adapt quickly to market dynamics and capitalise on current trends. They are also often undiscovered or underappreciated by mainstream investors, which may make them more attractive during times like this.

Long-Term Growth and Diversification

Making a new investment or adding to your existing investment in the Forager International Shares Fund not only provides the potential for attractive returns in the current climate, but also may enhance diversification within your portfolio.

Why a recession might be needed for small caps to work

Interested in reading more about why Steve and the team believe small cap stocks are currently presenting a good investment opportunity? This article and video explore the above points in more detail.