Artificial intelligence (AI) has been top-of-mind for investors for much of 2023, fueling a strong rally in the S&P 500. While it may take time for AI to have a similar impact on small cap stocks, we share the market’s enthusiasm and believe AI has the potential to become one of the most disruptive secular growth trends ever.
Markets are unpredictable, which is one of many reasons it is difficult to consistently deliver alpha over long periods. In their latest commentary, our small cap growth team explains why their approach to managing the trade-off between risk and reward gives them the opportunity to outperform across market cycles.
Small cap growth stocks lagged for most of 2021 as the market simultaneously dealt with the pandemic, inflation, and tightening Fed policy. Given these challenges, we have been focusing on high quality companies trading at attractive valuations, and we have also been looking at non-technology businesses that are embracing digitization.
Growth stocks have lagged cyclicals so far in 2021, but we remain steadfast in our belief that secular growth is the key to generating long-term returns. In this piece, we discuss how we find attractive opportunities in the small cap universe.
In the era of social distancing, technology has become even more integrated into our personal and professional lives. We believe this trend will persist even after the pandemic passes, and we expect it will particularly benefit firms that support remote working arrangements and eCommerce, two areas where we anticipate accelerating adoption and sustained growth.