Smaller European companies have underperformed larger peers in recent years, influenced by rising interest rates and investor preference for large-cap stocks. However, Comgest argues that size alone does not determine quality.
They highlight that many European Small and Mid (SMID) caps possess strong fundamentals, competitive advantages, and structural growth drivers, making them attractive opportunities for long-term investors. “Smaller companies tend to carry more debt in their balance sheets, have stronger operating leverage and more limited regional footprints than large-cap alternatives. Despite these challenges, we believe that there are several examples of SMID cap companies with the enduring competitive advantages of established market leaders,” said Denis Callioni, Analyst and Portfolio Manager at Comgest.
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