The Smaller Companies Opportunity

Jan 18, 2012

The tail-end of the market took such a battering in the second half of 2011, it should make followers of the FTSE blush. Economies are, ultimately, what people make them; it’s not necessarily a lack of capital, rather the reluctance to spend it, which causes us to occasionally grind to a halt. When smallcap shares fall because of generic malaise, value opportunities present themselves and the money finds its way back into circulation. Since the start of the year, we have witnessed a number of small and microcap stocks receive periods of concerted attention as ‘punters’ take a view on their prospects. Many use the Internet as a conduit to information, in particular the perceived altruism bulletin boards provide, and it only takes a few ‘winners’ to trigger acute activity.

Although AIM has its critics, it has evolved over the years and investors have a choice to back a wide range of companies, many arguably better capitalised than at any time in the junior market’s history. Maintaining a company’s quote on AIM is as much to do with someone’s tenacity and skill in dealing with regulatory obligations as it is simply getting on with funding and running the business. As capitalism prescribes survival of the fittest, those who come through the darkest times beaten-up, but nevertheless a going concern, merit the earliest attention. Smaller companies tend to get hit disproportionately hard in uncertain times, but therein lies the opportunity to take advantage ahead of a more widespread return of confidence.