Small cap comeback

Small companies are making a comeback. In the US small caps have been quietly thumping the giants, and we spoke with a fund manager who's riding the wave of small caps coming back into favour Down Under.

Meanwhile, the big end had its own party. The ASX 200 pushed to a fresh record high this week following all-time highs on Wall Street. The mood shifted on strong tech earnings and renewed optimism that the United States and Iran are nearing a deal that may fully reopen the Strait of Hormuz.

And here’s another small cap story that is too interesting to leave out. Gina Rinehart's Hancock Prospecting has taken a cornerstone stake in G50 Corp (ASX:G50), a tiny ASX-listed explorer. That’s Australia's biggest mining fortune, backing an Australian-listed explorer, digging in the United States.

Every multi-billion-dollar company was small once.

To your investing,

Small cap stock picks from a fund that has returned 20% per annum since inception

When interest rates are higher smaller companies can struggle because the cost of borrowing money goes up, making it harder to fund growth. While many small companies have recently underperformed larger stocks, Seneca Financial Solutions Australian Small Companies Fund has delivered 20.6% per annum since inception, outperforming the S&P/ASX Small Ordinaries Index by around 9% per annum after fees. Portfolio Manager Luke Laretive explains to TSN why he's bullish on small caps, where he's finding opportunities and what investors may be overlooking.

Stocks highlighted

Small companies leaving big names behind

The Russell indices track the performance of thousands of listed US companies and are widely used to measure the overall sharemarket. Over the full year to the end of April, the Russell 2000, which tracks smaller US companies, returned 44.4%, comfortably outperforming the broader Russell 3000 (31.0%) and the large-cap Russell 1000 (30.4%). The Russell 2000 has held its own in subsequent months, with both it and the large cap Russell 1000 rising by around 7% since end-April.

Clean TeQ Water (ASX:CNQ) - Completes PHOSPHIX® phosphate commissioning
CNQ completes commissioning and performance testing of its first full-scale commercial PHOSPHIX® phosphate removal plant in Europe, marking a key commercial milestone for the company's water treatment technology.

Archer Materials (ASX:AXE) - Advances Biochip medical diagnostics program
AXE advances the development of its Biochip medical diagnostics platform, progressing it towards a clinically deployable device, and expanding its sensing capabilities ahead of planned engagement with the U.S. FDA.

Control Bionics (ASX:CBL) - Reports commercial progress
CBL reports commercial progress across its Assistive Technology and NeuroTechnology Solutions businesses, with expanding distribution channels and growing adoption of its NeuroStrip™ platform.

Gwardar Resources (ASX:GRS) is a mining explorer that has entered into Acquisition Agreements to wholly acquire the Doolgunna and Kurnalpi Projects located in Western Australia.

Alurion Resources (ASX:ALU) is a demerged entity that owns the Amargosa Bauxite-Gallium Project previously held by Brazilian Rare Earths Limited.

Monvia (ASX:MNV) is a Software-as-a-Service company. The Insurtech’s flagship product, the cloud-based end-to-end Monvia Life Platform, is a specialist software solution for life insurance groups.

Biggest misconceptions about ETFs

What are the biggest misconceptions about ETFs, and why are they becoming a core portfolio building block? Betashares Founder and CEO Alex Vynokur explains why ETFs have become an increasingly popular choice for investors looking to build diversified, long-term portfolios.

What is margin debt?

Would you borrow money to buy shares? Investors in the US are doing so in record amounts. It’s called “margin debt” and it’s when brokers let investors borrow money using shares they already own as collateral so they can buy even more.

Why do stocks rise on "bad news"?

Why does the stock market sometimes go up on bad economic news? We recently saw this in the US when a weak jobs report came out with far fewer jobs than expected, yet the Dow closed at a record high.

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