Continuing our countdown to Christmas, Richard Bullas discusses recent small-cap underperformance against the broader market and the prospect of a period of increased M&A activity in the new year
The small-cap bull market that began in the early summer of 2012 had largely run its course by mid-2014, with many stocks enjoying dramatic reratings during this period. In the last couple of years relative performance has been more muted, with 2016 a particularly difficult year. The good news, however, is that this recent relative underperformance against the broader market means an attractive valuation gap has opened up, with UK smaller companies typically trading on a 15% to 20% valuation discount to their larger peers. The valuation gap can be explained by a number of factors, the...
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