The gap between star small-cap stocks and the rest widened this year. Hot tech stocks soared to sky-high valuations and many more limped along.
Index investing, algorithmic trading and the changing structure of the broking/funds-management industry are disrupting mid-, small- and micro-cap investing – and creating greater pricing inefficiencies and opportunity in this part of the market.
Stocks that are not a member of a key share market index (i.e. the majority of small- and micro-caps) are missing out on index buying through Exchange Traded Funds. At the same time, fewer stockbroking analysts and specialist small-cap fund managers means less coverage.