Our assessment of Swiss small caps

As one of the largest independent asset managers in Switzerland, we are constantly on the lookout for attractive investment opportunities in the domestic market. While many investors in the Swiss Market Index (SMI) focus primarily on large caps, i.e. well-known major corporations such as Nestlé, Roche or Novartis, we also deliberately look at companies outside these heavyweights.

This is precisely where attractive, less recognized investment opportunities can be found in the Swiss market. For us, small and mid caps are a sensible addition to our portfolios. Especially when quality, market position and growth potential are convincing and a selective admixture is justified. Before we look at specific case studies, we will first explain what is meant by small caps.

What are small caps

Small caps are listed companies with a market capitalization of a few hundred million to a few billion Swiss francs. They start from a much smaller base than established large caps with already high valuations. Small caps are often active in clearly defined niches and can tap into new markets more quickly. This makes above-average growth rates possible. The SMI is heavily dominated by a few large caps such as Nestlé, Roche, Novartis and ABB. These globally established companies are at a more mature stage of their development, which means that growth is generally more moderate than for smaller, more dynamic companies.

Burkhalter Holding AG: Outperformance due to structural demand

Burkhalter Holding AG is one of the leading providers of building technology in Switzerland. The Group comprises over 80 companies with around 5,300 employees at more than 160 locations. Over the past five years, Burkhalter has significantly outperformed the Swiss Market Index (SMI): While the SMI gained around +30 %, the shares achieved around +100 %.

The main reason for this is an exceptionally stable end market. The energy-efficient refurbishment of buildings is not only politically desirable, but also economically necessary. This ensures that demand can be planned for the long term. At the same time, the company covers the entire range of building technology. From electrical installations, heating, ventilation and sanitary facilities to telematics and automation solutions. This enables stable margins and reduces dependence on individual segments.

The combination of structural growth, stable cash flows and a clear focus on the Swiss market explains the sustained outperformance compared to the SMI. However, due to the lower diversification, the development is also more volatile than that of the SMI.

Medacta Group SA: Outperformance through innovation and specialization

Medacta Group SA is a Swiss family-owned company with over 2,000 employees and activities in more than 60 countries. The company develops implants and surgical solutions and specializes in minimally invasive and personalized surgical methods. Such procedures enable operations with the smallest possible incisions and individually adapted implants, allowing patients to regain their mobility more quickly. Medacta Group SA also clearly outperformed the Swiss Market Index (SMI): Over the last five years, the share has achieved around +80 %, compared with around +30 % for the SMI.

The company is benefiting from the increasing demand for orthopaedic procedures, which is being driven by an ageing and at the same time more active population. Another decisive factor is the consistent investment in innovation and training, which gives the company a technological edge. In combination with a clear positioning in the premium segment and expansion in a huge market, Medacta has succeeded in combining growth and profitability.

Inficon Holding AG: Outperformance through technology and market position

Inficon Holding AG is a highly specialized provider of measurement technology, particularly for the semiconductor industry, with over 1,500 employees and a global presence. Over the past five years, the share price has risen by around +120 %, while the Swiss Market Index (SMI) has gained around +30 %.

The outperformance is based on the strong market position in a technologically demanding environment. As chip production becomes increasingly complex, the importance of precise measurement systems grows. Inficon is deeply integrated into production processes and benefits from high barriers to entry and stable customer relationships. In addition, structural trends such as digitalization and artificial intelligence are driving demand. Despite cyclical fluctuations, this results in attractive long-term growth potential.