Russell Investments’ Chief Investment Strategist, Paul Eitelman, advises investors to maintain a strategic allocation to small-cap stocks despite the current economic uncertainty. While small-caps face challenges due to macroeconomic volatility, their attractive valuations and potential for outperformance make them a compelling long-term investment.
Endava Plc, a UK-based IT services company specializing in digital transformation, is gaining momentum in the sector. JPMorgan analyst Tien-tsin Huang has named it a ‘top pick’ with significant potential in digital IT for the second half of 2024. Endava’s strong growth prospects are fueled by the increasing need for digital transformation across various industries, particularly in payments, banking, and telecoms.
With the Federal Reserve potentially lowering interest rates, small-cap stocks could be primed for a comeback. Lower borrowing costs would benefit these companies, which often rely heavily on debt to fuel growth. Experts like Ed Egilinsky, Managing Director at Direxion, believe this presents opportunities for investors, particularly through leveraged ETFs and ETFs tracking the Russell 2000 index.
The AI revolution is in full swing, and while tech giants grab headlines, small-cap companies are quietly making a big impact. This article highlights three small-cap AI stocks – SoundHound AI, Helix Energy Solutions, and Innodata – with impressive growth and innovative solutions. These companies are shaping the future of AI, offering investors a chance to capitalize on the ground floor of the next wave of innovation.
A recent study suggests that investors are increasingly looking toward small-cap and micro-cap stocks as interest rates are expected to decline and market conditions improve. The study, commissioned by advanced aerospace engineering company New Horizon Aircraft, highlights the growing appeal of these market segments, particularly among institutional and retail investors. The study also draws parallels to the dot-com bubble, suggesting that small-cap stocks could be positioned for a period of outperformance, similar to their rebound after the burst of the dot-com bubble.
The Russell 2000 index is experiencing a strong rebound fueled by positive economic data, including robust retail sales and a decline in jobless claims, alleviating recent recession concerns. The index’s performance highlights its sensitivity to economic indicators and the potential for growth in the small-cap sector.
Tom Lee of Fundstrat Global Advisors believes the Federal Reserve may be softening its aggressive interest rate hiking stance. Recent data showing disappointing consumer spending, such as Starbucks’ lackluster same-store sales, suggests that rising costs are squeezing household budgets. Additionally, Fed Chair Jerome Powell’s comments expressing preparedness to respond to labor market weakness may signal a shift in the central bank’s policy stance. Lee predicts a good chance that interest rates have reached their peak and sees a positive outlook for stocks if inflation improves as expected. Small-cap stocks and the technology sector, particularly those benefiting from artificial intelligence, are poised to excel in the coming months.
Man Industries (India) Ltd has been a top-performing multibagger stock, doubling investor money in the past six months and delivering over 350% returns in the past year. The stock has recently gained attention as ace investor Ashish Kacholia acquired a 2.10% stake in the company during the January-March 2024 quarter. Kacholia’s latest buy has added to the bullish sentiment around the stock, which has already witnessed significant growth in recent times. In the last month alone, the stock has risen over 15%, while in the past six months, it has surged by 110%. Notably, in the past year, the stock has soared by over 350%. Man Industries has a market capitalization of Rs. 2,751 crore and is available for trading on both the BSE and NSE.
Longleaf Partners Small-Cap Fund returned 6.85% in the first quarter of 2024, outperforming its benchmark index and absolute annual return goal of inflation plus 10%. The fund’s strong performance was driven by solid returns across many of its portfolio holdings, despite headwinds faced by value investing relative to growth strategies. Portfolio companies continue to grow their value per share, and management partners are taking action to realize value through discounted share buybacks and other intelligent actions.
The stock market has proven lucrative for investors in recent years, with several small-cap stocks on Dalal Street delivering exceptional returns. Waaree Renewable Technologies emerged as the top gainer, with its shares soaring 664.6 times in the past five years. Other notable gainers include Diamond Power Infrastructure, Integrated Industries, and Authum Investment & Infrastructure, each delivering multibagger returns to investors.
