Beware the small-cap value traps

Over 1,000 firms in small-cap universe

Smaller companies are often perceived to be young and dynamic, with their best years ahead of them. While this often holds true, there are also those businesses whose plight reflects past excesses, such as failed acquisitions or stressed balance sheets.

Others have failed to move with the times and their business models are being disrupted by technology.  On some traditional valuation metrics these businesses may appear cheap, but with an uncertain future ahead of them, beware the value traps. Fortunately, with a rich universe of over 1,000 stocks to pick from, the small-cap manager has plenty of scope to identify their long-term winners. Value vs growth: FundCalibre's six funds to watch Diversified portfolios can be built around companies who are successfully taking share from unfocused big companies, or benefitting from taki...