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Winning with micro-caps amid massive turmoil

River and Mercantile UK Micro Cap manager George Ensor tells David Baxter how he finds companies with potential, valuation and timing
Winning with micro-caps amid massive turmoil

UK equities have been far from popular in 2020. Loaded with companies hit hard by the coronavirus crisis, a wave of dividend cuts and Brexit uncertainty, the UK market has become even more of a contrarian play. However, there are glimmers of hope in unexpected places.

UK smaller companies indices have enjoyed a stronger recovery than the likes of the FTSE 100 since April. And investors with a focus on some of the smallest companies argue that opportunities stemming from this year’s crisis could ultimately pay off. 

River and Mercantile UK Micro Cap Investment Company (RMMC) invests in stocks so small that many ignore them. Its manager, George Ensor, buys into companies with a market capitalisation of less than £100m, which analysts and larger funds tend not to focus on. Mr Ensor and his team look at companies with a free float of between £20m and £100m – a process that tends to throw up around 450 stocks. They screen companies based on various metrics, seeking those that have “potential, valuation and timing”. These are stocks that trade cheaply, and have the potential for substantial growth and a possible catalyst to trigger strong returns.

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