Small- and mid-cap companies are still likely to outperform big-caps this year, although the outperformance will not be as great as in 2003, says Neil Pegrum, Insight Investment director UK Equities.
This means there will be no "easy pickings" for those who last year could have chosen just about any FTSE 250 firm and still come in ahead of those restricting their choices to the 100 biggest companies.
Pegrum's bottom-up approach to stock-picking means he is still looking at big-caps, of course, and he currently sees some good opportunities there too.
"I’m positive on the water review," he says, explaining why he believes the market is currently undervaluing water companies.
The review involves the government and industry negotiating long-term water prices, but Pegrum’s view is this will turn out to the benefit of the firms involved.
Power utilities are another group in favour, such as International Power, and transmission giant NGT is also good value, not least because of its huge cashflow.
Pegrum does not pretend to be able to follow all the stocks in the universe, saying it doesn't matter if he misses some out of the thousands available with which to generate profits through UK Dynamic fund he manages.
With such a plethora of investment opportunities available, the risk-taking fund has more than enough to fill its plate, he adds.
Looking ahead again, Pegrum is fairly optimistic about 2004, but says investors should take care not to expect another 2003, which was exceptional in terms of the returns it generated across the board.IFAonline
SLA to continue managing one-third of assets
Wins contest against Jeremy Hunt
Liquidity, flows, access, research