Small-cap stocks have faced challenges in recent years, particularly in Europe, where they have experienced a significant decline relative to large caps.
Factors contributing to this downturn include interest rate increases, a recessionary environment, and the effects of the COVID-19 pandemic.
Despite these challenges, experts remain optimistic about the future of small-cap stocks.
The financial health of small-cap companies is a critical factor in their recovery potential. Companies burdened with high net debt face significant challenges, especially when refinancing becomes necessary.
Berenberg focuses on identifying high-quality firms with strong returns on capital and robust balance sheets.
Kraus emphasizes the unique landscape of European small caps, where many promising companies operate under the radar due to limited analyst coverage.
Among the sectors attracting attention are technology and healthcare, where several European hidden champions are emerging.
Scandinavia, particularly Sweden, is emerging as a hotspot for small-cap investment opportunities. Sweden is recognized for its leadership in healthcare and technology innovation. Currently, Sweden accounts for a substantial portion of Berenberg's small-cap and micro-cap funds.