Image: Chris McVey, senior fund manager, Octopus Investments For equities, 2022 was clearly a challenging year. Economic and geopolitical concerns buffeted markets, and this uncertainty triggered a significant derating of growth equities. But, in our view, it also triggered one of the best buying opportunities for UK small- and mid-cap stocks in over a decade. The great decoupling Our focus on those quality-growth small- and mid-cap companies was a part of the market significantly impacted during the sell-off. However, we believe there remains a lot of opportunity in the UK, as well as a large number of strongly trading businesses. We retain our focus on companies which we believe can grow earnings throughout the economic cycle, and we have been largely reassured by the underlying operational performance of many of these growth companies, despite many share prices decoupling from these solid fundamentals. When market conditions normalise, many of these stocks should re-rate significantly, offering investors attractive returns over the medium term. The last time we encountered share prices deviating from earnings to this extent was during the financial crisis. That turned out to be the buying opportunity of the decade. We are currently in that same valuation territory, although […]
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