I love investing in small & mid cap stocks (SMC’s) in Thailand. I was first exposed to researching them back in 2006 when the fund I was with realised that none of us were very good traders of large caps, and that we were far better researchers of companies and industries. Since then I’ve never looked back from having them as a core portion of my portfolios. Below we show that SMC’s achieve a far higher annual return versus the market and large caps.
Every large company used to be a small or medium size one. Investing in small and mid capitalisation equities has always been considered to be risky because of the “unknown” factors when compared to large capitalisation investments. Large cap companies refer to some of the largest, most well-known companies in the country, and small-cap and mid-cap companies often represent little known firms with revenues between THB 2 billion to THB 10 billion. There is an obvious risk-return paradigm between small, mid and large cap companies, generally small companies exhibit more volatility and are less liquid when compared to large cap companies yet have tremendous growth potential. Mid cap are a moderate alternative between large-caps that may find it difficult to increase shareholder value and the riskier small-caps.