Small-cap tips: how to invest during a recession

TL;DR

Investing in UK small cap stocks during the pandemic requires careful consideration of financial strength, market potential, and a long-term perspective.

Transcript

with me today I have Victoria Stevens Co manager of the Lyon trust UK's smaller companies found hi Victoria now within the portfolio are there any companies that you've decided don't fit anymore if you've sold any down during the the pandemic I asked because I see Hilton food group in team17 they've dropped out the top ten but also just wondering w... Read More

Key Insights

• ❓ Some stocks in sectors directly impacted by the pandemic, such as leisure attractions and casinos, have underperformed.
• 🏣 The focus is on companies' financial strength and ability to survive and take advantage of opportunities post-pandemic.
• ✋ The fund's investment strategy prioritizes steady long-term growth rather than quick high-risk gains.
• ⚖️ Financial strength and balance sheet conservatism have been crucial in navigating the challenges of the pandemic.
• 👲 Small caps are agile and flexible in adapting to a changed world, but the timing of market recovery is uncertain.
• 🤗 Investors should approach small cap investments with an open mind, objective process, and a focus on individual company fundamentals.

Questions & Answers

Q: Have any companies been sold from the portfolio due to underperformance during the pandemic?

While some companies have underperformed, none have been sold completely. The focus is on their ability to survive and emerge stronger post-pandemic.

Q: Are there any potential "ten bagger" stocks in the portfolio?

The investment strategy focuses on steady long-term growth rather than short-term high-risk opportunities. Examples of companies with strong growth potential include Ideagen and Global Data.

Q: How is the fund approaching the challenging period for small cap stocks during a deep recession?

The fund acknowledges the tough times ahead for many companies as government support is withdrawn. Financial strength and balance sheet conservatism are important factors in weathering these challenges.

Q: Do UK small cap stocks historically outperform large caps in economic downturns?

While small caps have historically outperformed after previous downturns, the current unprecedented macroeconomic uncertainty makes it difficult to predict future market trends.

Summary & Key Takeaways

• Some companies in the Lyon trust UK's smaller companies fund, such as Hilton Food Group and Team17, have dropped out of the top ten due to share price movement during the pandemic.

• Companies in sectors directly impacted by the virus, such as leisure attractions and casinos, have underperformed.

• The focus is on evaluating companies' ability to survive the downturn and take advantage of the upturn in the future.