Investors looking to allocate money in small-cap equities need to factor in the proper time horizon of the shares in question to get the full benefit of any associated capital growth, according to Naos Asset Management portfolio manager Sebastian Evans.
“While many market leaders might argue the five best performing stocks have the capacity for accelerated growth because they are small, I would argue that any serious investor must take a serious look at any opportunity to quadruple their money over a reasonable time period, or that of their clients,” Evans said.
He pointed out reliance on research into small-cap shares can be deceiving in this context.
“It seems that many larger research houses only start researching small companies when they are on the cusp of inclusion into the top 200 stocks. Companies such as Conquest Mining, Intrepid and Acrux have trebled in size in over the past year, yet they have only just been picked up by larger funds,” Evans said.
In Evan’s estimation, 2011 is going to see a lot of small-cap companies participating in initial public offerings.
“There’s now a lot of cash waiting on the sidelines of the small-cap space, and if investors see the investment opportunity the small caps will continue to rebound strongly,” he said.
In regard to specific sectors, Evans thought biotech small caps would perform well while resource stocks and gold would also offer up good opportunities in the first half of the new year.
