Metro Inc. (grocer) and Generac (power generation) are just two examples of companies that have managed to shed their “small-cap” company skin to join the ranks of the largest companies trading in their respective markets. Yet, for every business that makes it to the big leagues, many others fail.

For investors like Burgundy who thrive on research, small companies are a very attractive alternative to owning a handful of blue-chip stocks. In this panel discussion, which was featured during the 2021 Burgundy Forum, Burgundy’s small-cap teams offer insight into how they comb through a universe of thousands of opportunities to build a high-quality portfolio.

 Read Before You Watch:

Cap is short for market capitalization, which essentially is the number of a company’s shares multiplied by its stock price. Making up a very large universe, small-cap companies generally have a market cap of $5 billion or below. If we only look at companies with reasonable liquidity worldwide, about 6,000 companies would be considered small caps. So, why spend all this time looking at thousands of companies when you could just own a handful of blue-chip stocks? In the 1980s, two researchers made small cap investing more popular when they published that the average annual return for small caps was 6% higher than large caps.

But what explains this difference? These more volatile companies tend to be less mature, more thinly traded, and a lot harder to find information on. As a result, investors demand to be compensated for the extra work and risks associated with small-cap stocks.

Highlights of the session include:

  • 1:19: Evolution of the Small-cap Research Process Over Time
  • 3:20: Filling the Research Gap on Small-cap Companies
  • 7:55: Simple Business Models
  • 9:56: Being a Contrarian

For an alternate format, access the transcript via the “Download PDF” link at the top of this post. The transcript has been edited for clarity.

Caroline Montminy

Caroline Montminy, CFA

Vice President,

Investment Counsellor

Steve Boutin

Steve Boutin, CFA

Senior Vice President,

Portfolio Manager

Andrew Iu

Andrew Iu, CFA

Vice President,

Portfolio Manager,

Director of Research

Andrew Choi

Andrew Choi, CFA

Vice President,

Portfolio Manager

If you want to learn more about Burgundy’s history and approach to small-cap investing, please contact us.


This post is presented for illustrative and discussion purposes only. It is not intended to provide investment advice and does not consider unique objectives, constraints or financial needs. Under no circumstances does this post suggest that you should time the market in any way or make investment decisions based on the content. Select securities may be used as examples to illustrate Burgundy’s investment philosophy. Burgundy funds or portfolios may or may not hold such securities for the whole demonstrated period. Investors are advised that their investments are not guaranteed, their values change frequently and past performance may not be repeated. This post is not intended as an offer to invest in any investment strategy presented by Burgundy. The information contained in this post is the opinion of Burgundy Asset Management and/or its employees as of the date of the post and is subject to change without notice. Please refer to the Legal section of this website for additional information.