FEAR & GREED | Business News Small caps are back. Can they keep going?
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Jan 8, 2026 Roger Montgomery, founder and chief investment officer of Montgomery Investment Management, shares his expert insights on the resurgence of Australian small caps. He discusses the factors behind their recent outperformance, including shifting investment trends and the critical importance of governance and management. Roger also highlights five promising small-cap stocks, such as Zip and Megaport, illustrating the dynamics of this revitalized sector. Tune in for an engaging exploration of investment opportunities in small caps!
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Small Caps Stage Cyclical Comeback
- Small caps cyclically underperform then outperform, and a recent rebalancing drove their comeback in 2025.
- Small caps often deliver several times the growth of large caps for similar P/E multiples.
Rotation From Big Caps Opened Small-Cap Doors
- Global flows into AI and large-cap names left overlooked opportunities in small caps.
- Investors rotated away from banks and big caps, prompting fund managers to hunt for value among smaller companies.
Prioritise Quality Growth Stocks
- Seek small caps that are quality businesses with strong growth rather than chasing any cheap name.
- Prefer companies growing mid double digits or higher while trading at similar P/E ratios to large caps.