Global Small- and Midcaps: Searching For Big Opportunities

Title: Global Small- Midcaps: Searching for Big Opportunities

Abstract: We discuss where some of the best opportunities in the Global Small- and Midcaps asset class can be found.

Q3

Where can we find the best opportunities in the Global Small- and Midcaps asset class?

Nick Paul:

There's tremendous opportunity in the asset class today. One of the big reasons for that simply is that there's 8,000 names in the benchmark. Many of these names are very thinly covered by sell-side research. So it tends to be a very inefficient asset class that really lends itself to active management. So, tremendous opportunity. I'll give you a couple of quick examples. The first would be in IT services. We're currently finding opportunities, and actually have been for the last several years, opportunities in IT services, particularly within Japan. So Japan, if you look at Japan relative to other developed markets, are still sort of behind the curve in the digital transformation or the transformation to the cloud. IT services are going to be a big part of the ability for companies to get there, and we're finding tremendous opportunity in that area of the market.

Another quick example would be in infrastructure, both in the US and even in the UK and in Japan as well. A number of very interesting opportunities in the US as the Inflation Reduction Act has increased spending on traditional infrastructure, so think bridges and roadways. We've identified engineering companies that should benefit from that. Concrete and aggregates business that go into constructing these infrastructure projects is another example. In Japan, we actually own an engineering company focused on energy and energy transition, where that is going to take years to play out within Japan and many other markets. And even in the UK, we own an aggregates business that is tied into infrastructure. So infrastructure's another great example.

Onshoring gets a lot of press these days, or nearshoring. We own an industrial real estate investment trust in Mexico. So as companies look to move supply chains and goods and services closer to the US, that's another opportunity that we've found more recently. So this is just a couple of examples, but again, with 8,000 names out there, broadly diversified across regions and sectors and industries, there's ample opportunity to find very, very unique names and opportunities in this asset class.

This material is intended for investment professional use only and not intended for retail investors.

The views expressed are those of the speaker and are subject to change at any time. These views are for informational purposes only and should not be relied upon as a recommendation to purchase any security, or as an offer of securities or investment advice. No forecast can be guaranteed. Past performance is no guarantee of future results.

MFS International Australia Pty Ltd (“MFS Australia”) (ABN 68 607 579 537) holds an Australian financial services license number 485343. MFS Australia is regulated by the Australian Securities and Investments Commission.

This material is directed at investment professionals for general information use only with no consideration given to the specific investment objective, financial situation and particular needs of any specific person. Any securities and/or sectors mentioned here in are for illustration purposes and should not be construed as a recommendation for investment. Investment involves risk. Past performance is not indicative of future performance. The information contained herein may not be copied, reproduced or redistributed without the express consent of MFS Investment Management (“MFS”). While the information is believed to be accurate, it may be subject to change without notice. MFS does not warrant or represent that it is free from errors or omissions or that the information is suitable for any particular person’s intended use. Except in so far as any liability under any law cannot be excluded, MFS does not accept liability for any inaccuracy or for the investment decisions or any other actions taken by any person on the basis of the material included. MFS does not authorise distribution to retail investors.

Unless otherwise indicated, logos, product and services names are trademarks of MFS and its affiliates and may be registered in certain countries.

 

58544.1