With interest rate cuts expected soon and other market conditions potentially set to improve, savvy investors are turning their attention to small-cap and micro-cap stocks, a new study suggests. According to the research, which was commissioned by advanced aerospace engineering company New Horizon Aircraft, both institutional and retail investors might significantly boost their allocation to these market segments over the next 12 months.
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00:00A recent study suggests that with anticipated interest rate cuts and improving market conditions,
00:07investors are increasingly looking at small-cap and micro-cap stocks as promising opportunities.
00:13Commissioned by New Horizon Aircraft, NASDAQ, HOVR, the research indicates a potential surge
00:19in allocations to these market segments over the next 12 months by both institutional and
00:24retail investors.
00:25The study, conducted by Pure Profile, surveyed fund managers managing $82.4 billion in assets
00:31across multiple regions, including the U.S., Canada, and Europe.
00:36Key findings reveal that 76% of respondents expect institutional investors to increase
00:42their exposure to small- and micro-cap stocks, with 34% predicting a rise of 25% or more.
00:49Retail investors are also likely to follow suit, with 83% of respondents forecasting
00:53increased allocations, and 12% even anticipating a potential 50% boost in investments.
01:00Despite this, the study found that there remains a perception that current exposure to these
01:04stocks is underweight, particularly among retail investors.
01:09The study draws parallels to the late 1990s dot-com era, where small-caps outperformed
01:14large-caps following a market downturn.
01:17Today, the valuation gap between small and large-caps is the widest it has been since
01:22then.
01:23There are small-caps trading at 14 times earnings compared to 20 times for large-caps.
01:28This suggests that small-caps may be poised for a period of outperformance once again.
01:32New Horizon Aircraft, a small-cap company in the advanced air mobility space, exemplifies
01:38the kind of innovative businesses that could benefit from this shift.
01:42Their hybrid electric vertical takeoff and landing, EVTOL Aircraft, the Caverite X7,
01:47is designed for diverse applications, positioning the company as a key player in a rapidly evolving
01:53industry.