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.