European small caps are set for another strong year, continuing a historical trend of outperformance in times of slow growth and benefiting from attractive valuations, says Credit Suisse.
The STOXX Europe Small 200 index is up 21 percent so far in 2012, broadly on a par with the mid-caps and outperforming a gain of 14 percent on the large caps.
“Despite the tough economic environment in Europe, we note that SMID (small/mid caps) has generated average returns of 10 percent during similar years, thereby outperforming large caps by 700 basis points on average,” Credit Suisse analyst Eugene Klerk writes in a European SMID outlook note.
Although small and mid-caps are still trading on a premium to their larger peers, the valuation gap is below its five year average and below the historical average for years of similar economic growth, Klerk adds.
Credit Suisse adds Almirall, Autogrill, Dialog Semi, Flughafen Zuerich, Micro Focus , OC Oerlikon, Polarcus and Taylor Wimpey to its SMID focus list.
The list also includes APR Energy, Bodycote , Moneysupermarket.com, MTU Aero Engines , Ophir Energy and Rotork.
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