Small-cap stocks have significantly outperformed the broader ASX this year, driven by factors such as rate cuts, a resilient economy, and a surge in gold prices. Resource-heavy small-cap companies have been major contributors, with the demand for gold, copper, and critical minerals fueling growth. Stocks such as Life360, Generational Development Group and Catapult have also risen, delivering solid returns to shareholders.
Rory Hunter, head of emerging companies at SG Hiscock, acknowledges luck plays a role in small-cap investing. The SGH Opportunities Fund has seen a 51 per cent net return over the 12 months to the end of October, significantly exceeding the Small Ordinaries benchmark. SG Hiscock is a Melbourne-based money manager. The company actively invests in emerging companies, seeking outsized returns for its clients.
Hunter highlights the importance of a strong team, including Adrian Di Mattina, a founding principle of SG Hiscock with 30 years of experience in small-cap investing. He also notes the addition of Stephen Gorenstein, a geologist, whose expertise is valuable in the current market. Hunter believes the outperformance of small-cap resources can be sustained for the next decade, driven by geopolitical factors, the rise of AI, and the transition to renewable energy.
Looking ahead to 2026, Hunter is overweight in both resources and technology. While acknowledging concerns about an AI bubble, he sees significant earnings potential in the technology sector. Stocks like Energy One, a software provider, and Dug Technology are among his holdings, alongside existing positions in Generational Development and Catapult. Hunter emphasised the importance of letting winners run, even amid market volatility.
