European equities have been in high demand with investors but JP Morgan Asset Management investment trust managers Francesco Conte and Jim Campbell say the European small cap space remains an “under-researched opportunity”.
The European small cap universe encompasses more than 1,500 stocks, according to the managers of the JP Morgan European Smaller Companies investment trust.
However they also point out that the average European small cap stock is covered by only four analysts compared to 17 for large caps.
Conte and Campbell argue that this lack of coverage within the small cap space allows investors to tap into a relatively untouched area within popular European equities.
“Small cap stocks represent a huge and under-researched opportunity base. Because a smaller relative number of analysts cover small cap stocks, this means it is a less efficient market with a broader opportunity set,” they say.
The European small cap sector has also managed to outperform broader European stocks, according to research by JPMAM.
Data from JPMAM reveals that the Euromoney Smaller European Companies Index has outperformed several global indices including broader European stocks on a cumulative basis over the past 20 years.