Source: Refinitiv DataStream, 31 July 2021. Reference to specific securities is for illustration only and should not be construed as a recommendation to buy or sell these securities. Please remember past performance is not a reliable indicator of future performance.
The mid-cap universe is home to many potential “multi-baggers” [stocks that increase many times from their initial offer price]. The segment is under-researched compared to its large-cap counterpart. Fewer investors researching these names increases the likelihood of high-quality businesses flying under the radar, allowing for mispriced opportunities.
Investors also tend to miss the forest for the trees, not realising there are well-established businesses with strong records alongside the more obvious listings of newer companies and business models.
Many of these businesses are also founder-led. This increases the likelihood that management teams are innovative, agile and that their interests are strongly aligned with outside shareholders.
In our experience, the best ideas or “future leaders” in the global small- and mid-cap universe are typically business models that are either structural winners, technology disruptors, innovators, category killers, and/or brand leaders.
Sometimes these businesses are unique niche operators or specialists that dominate their field. At other times they are part of a large global theme. Sectors such as technology, healthcare, globally focused consumer, and industrials have more recently been home to such business models.