Small-cap stocks have been outperforming in 2021. Here’s why

Small-cap stocks have been making significant strides in 2021 compared to the larger indices such as the Orchard and Midcap indexes. As CNBC Africa's Mr. Smallcaps, Anthony Clark, explained in a recent interview, the small-cap sector has seen a remarkable outperformance due to investors recognizing the value in these often overlooked companies. Clark highlighted that the market for small caps began to turn around August and September of the previous year, leading to substantial gains and corporate activity in the sector. This surge in small-cap stocks is not necessarily tied to the global economic recovery, but rather a result of sharp sell-offs in the sector, making valuations incredibly attractive for potential investors. In the context of South Africa, where the economy remains weak, small-cap stocks have presented a unique opportunity for individuals to acquire assets at historically low prices, with some companies even seeing substantial buyouts from private equity firms and management teams. One example that Clark discussed in the interview was Zeta Investments, a company that has attracted attention due to its undervalued position in the market. Clark suggested that Zeta Investments might benefit from selling off its parts, a strategy that could potentially unlock value for shareholders. The discussion also delved into Renagen, a company focused on helium production, which has seen its stock price soar in recent months. Clark shared his insights on Renagen's promising future, emphasizing the transition from a speculative play to a viable business with clear paths to profitability. Despite certain communication challenges, such as clarifying details for international stakeholders, Renagen's progress indicates a positive trajectory for the company. Overall, small-cap stocks seem to be thriving in 2021, offering investors unique opportunities for growth and value creation.