Small cap investors told to 'stop whinging'

Forager Funds Management chief investment officer Steve Johnson has told small cap investors to "stop whinging" about share prices.

In an exerpt from the March Quarterly Report, Johnson said there are plenty of smaller companies that have seen significant share price rises.

"There are reflections of the 2021 meme bubble in some artificial intelligence related stocks (I use the word "related" loosely)," Johnson said.

"But, for the most part, I would argue there are often logical reasons for those that have risen to rise and those stocks that haven't participated in the rally to be left behind. Companies that are delivering good results are seeing it reflected in share prices. Those that aren't, aren't."

Johnson said the message for investors and companies alike is clear; good companies will perform and those that aren't good won't.

"There are plenty of smaller companies trading at appropriate or even optimistic share prices. If your company isn't one of them, it's time to stop whinging about small cap malaise and start focusing on what the business needs to do to be recognised," he said.

"Deliver profits, cashflow and growth, and there are plenty of investors who want to own your shares. Deliver broken promises and your share price will remain in the dumps."

Johnson said Forager sold a meaningful percentage of its investment in some small caps due to valuation but said there were exceptions where good progress was not reflected in share prices.

"Overall, the market mood for small caps has changed from outright pessimism to selective optimism," Johnson said.

"The opportunity for share price appreciation is significant for those companies that can give investors a good reason to invest. It is up to us to find the right stocks and companies to deliver results."