Royce spotlights small caps set to beat big names in market turbulence

Miles Lewis, a portfolio manager at the Royce Small-Cap Total Return Fund, has spotlighted six small caps that could outperform in an environment of high interest rates and a possible recession. Smaller companies, unlike big-cap multinationals, are more insulated from tariffs and deglobalization, as they tend to focus on the domestic market, he told Forbes. Below are Lewis’s top picks.

— UFP Industries, a supplier of lumber and treated wood, is largely focused on domestic demand. 

— International General Insurance Holdings is a Jordan-based insurer that, as Lewis puts it, “underwrites weird risks in weird places.” As an example, he cited a payout for the cancellation of a rock concert in Venice after the lead singer inhaled smoke during a fire at a gig in Paris.

— Sporting goods retailer Academy Sports & Outdoors caters to lower-income customers, Lewis notes. In a recession, consumers tend to shift to more affordable retail chains.

— Advance Auto Parts, which sells parts for used vehicles, may have to raise prices due to tariffs, but it is likely to benefit as drivers keep their cars longer, as noted in the article.

— Hingham Institution for Savings, a savings bank founded in 1834, stands to benefit from high interest rates, Lewis argues.

— Assured Guaranty provides credit protection products. Due to a poor return on equity, the stock is trading at a 23% discount to its book value, which the company is taking advantage of by buying back its own shares, Forbes writes.