An AIM share tip and two stocks we've just bought | Summary and Q&A

TL;DR

UK smaller companies have been out of favor due to their perceived risk, but they have the potential for long-term growth and outperformance.

Key Insights

• 🛩️ UK smaller companies are perceived as riskier assets and are often avoided during times of market uncertainty.
• 👯 Investor sentiment can improve when bad news is priced in and people start to see a potential recovery.
• 🍉 UK smaller companies have historically outperformed UK larger companies in the long term, due to their growth potential.
• 🛄 The aim market is an important source of investment opportunities, but it also carries risks.
• 🍉 Traxxis is a UK-based company that specializes in rail technology and has the potential to be a long-term winner.

Transcript

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Questions & Answers

Q: Why have UK smaller companies been out of favor in the stock market?

UK smaller companies are seen as a risky asset, and investors tend to avoid them during periods of macroeconomic concerns or market uncertainty.

Q: What could be the potential catalyst for investor sentiment to improve?

When investors feel that things can't get much worse and the bad news has been priced in, they may start to see a buying opportunity, which could improve sentiment.

Q: Can UK smaller companies outperform UK larger companies in the long term?

Yes, UK smaller companies have the potential to outperform in the long term because they are bought at a growth phase when they are growing at their fastest rate.

Q: Has the recent sell-off in UK smaller company stocks presented buying opportunities?

The fund manager is considering adding new positions or increasing existing holdings, but market timing and the potential for further price declines also need to be considered.

Summary & Key Takeaways

• UK smaller companies have been hit particularly hard in the stock market this year, as they are seen as a risky asset.

• Historically, there has been a perception that UK small caps are more domestically focused, but this is no longer the case.

• Investor sentiment for UK smaller companies may improve when there is a perception that things can't get much worse and potential buying opportunities arise.