Despite the recent rally, there is still excellent value to be found in UK small caps, according to JP Morgan.

At the recent JP Morgan Smaller Companies Investment Trust AGM, Georgina Brittain, who manages a total of around GBP 1 billion for clients, including the £102.1 milion JP Morgan Smaller Companies Investment Trust, told investors that despite the rise in small cap performance year to date, there is further to go and good quality stocks are continuing to rise.
 
Brittain holds an average of 110 stocks at any one time in the investment trust, with increasing overweights in support services and technology. In particular, the manager has moved from a very large underweight position in real estate in 2007 to now being overweight. Her largest underweights include bio techs and construction.
 
Looking forward to 2010, Brittain expects the UK economy to continue to be sluggish with limited growth opportunities. For this reason she is focusing on investing in UK listed small cap companies that are gaining exposure to international markets, specifically those with good earnings and growth potential.
 
She says, ‘There are a significant number of ex UK focused companies listed in the UK and I am finding some excellent growth opportunities in such companies. I do not focus on a particular country or region as my main concern is to focus on the fundamentals and potential of the company, therefore stock picking is on a bottom up basis.

‘Throughout the last few months, the emphasis on the portfolio has been to concentrate on investing in good quality companies which are undervalued by the market. Despite my views of 2010 for the UK economy, I am still finding that small cap valuations are very attractive and I am continuing to find many niche growth opportunities worth investing in.’

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