232. A brighter future for smaller companies in 2023

Simon Moon and Alex Game, managers of the Unicorn UK Smaller Companies fund, review a tough year for their sector but are confident in still being able to find opportunities by buying into under-priced, high-quality assets. Both managers identify smaller companies as being able to react and adapt quicker to changing fiscal environments than their larger comparators, so they believe that smaller companies will be well-positioned in light of recovery, which may be just around the corner, according to the general feeling in recent meetings with company management teams.They tell us more about the interesting results of their research into 60 years of inflation data, how reshoring is affecting the sector, and how engineering companies in the portfolio will be able to weather any recessionary factors. The managers finish by commenting on several high-quality structural growth companies which they recently acquired using their disciplined relative value approach.
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Unicorn UK Smaller Companies is a small, flexible fund with a solid investment process and a highly competent team. This is a very high conviction UK smaller companies fund with around 40 holdings. Its manager focuses on company fundamentals and aims to make long-term investments, while avoiding low quality, cash-burning businesses.

What’s covered in this episode:

  • Why 2022 has been tough for UK smaller companies
  • Why smaller companies are in a better position than after global financial crisis
  • Which opportunities exist amidst depreciating sterling and volatile markets
  • How smaller companies adapt faster and are more agile than larger comparators
  • How inflation data from over the last 60 years suggests a good future for smaller companies
  • A look at which catalysts will boost this sector’s performance
  • The impact that reshoring is having on the sector and the wider UK economy
  • Why industrial engineering companies are better able to withstand a recession
  • Which growth companies they have recently added to the fund, and why
  • How they buy new holdings using the fund’s disciplined investment approach
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