Is there a contrarian investor in you? Are you sympathetic to the argument that UK smaller companies are poised for a comeback after an extremely challenging three years?
If that’s the case then please register for our next online broadcast at 10am on Wednesday 31 January with River and Mercantile UK Micro-Cap Investment Company (RMMC).
In the one-hour programme, the investment company’s fund manager, George Ensor, will explain how a recovery in depressed UK equities should extend to the smallest part of the market where he invests, ie, in companies below £100m.
In a presentation entitled, ‘Here comes a golden decade for UK micro-caps’ Ensor will argue that UK smaller companies do well when inflation is falling. He points to the 1970s oil crisis when ‘small-cap’ stocks hit a low in January 1975 but began a ‘golden decade’ after inflation peaked at nearly 27% in August that year. By 1985 UK small caps had notched up capital returns of over 35% a year in the previous decade.
Again, from the lows after the banking crisis in March 2009, UK smaller companies gained more than 500% up to their peak in September 2021, double what the overall UK market achieved.
To find out more, register here now!
Micro ‘premium’
True, inflation and interest rates are not as high today as they were in the 1970s and the former is proving stubborn for the Bank of England to subdue. Nevertheless, Ensor (above) is convinced that ‘micro-caps’ can regain an historic premium that over the long term has seen the UK’s smallest stocks deliver 4%-5% a year more than FTSE 100 ‘large caps’ due to their scarcity value and growth potential.
In the meantime, the smallest end of the market is overlooked and trades on a double discount: firstly below FTSE blue chips, which themselves are undervalued compared to international peers.
Make that a triple discount as River and Mercantile UK Micro-Cap’s share price currently trails 18% below the net asset value of its investments, which include its top 5.6% position in rapidly growing Keystone Law (KEYS).
RMMC was launched nearly 10 years ago with Ensor, a former analyst taking over in February 2018. Its small size with £64m net assets does not just reflect the bear market in its sector in recent years. It also demonstrates its policy of keeping the fund nimble by returning capital to investors when it approaches £100m. This innovative approach ensures RMMC does not become too large to invest in the growth stocks it identifies.
Register here to find out more about this compelling investment opportunity. The event will be chaired by Citywire’s Gavin Lumsden and will include Q&A in which viewers can ask the fund manager questions.
