Identifying high-quality small and mid-cap companies with strong management teams and sustainable competitive advantages is essential for investors, according to the Fiera Apex report. The healthcare and technology sectors can offer “an attractive combination of high growth potential and manageable risk,” the asset manager’s report states.
Healthcare
Driven by prolific innovation, demographic tailwinds, resilient demand, and solid fundamentals, healthcare among small and mid-cap companies holds one of the greatest long-term growth potentials, according to experts.
Within the biotechnology subsector, significant opportunities can be found in companies focused on addressing unmet medical needs with de-risked clinical assets and substantial upside potential in the market.
Prescription drug spending in the U.S. exceeds $400 billion annually and continues to grow. However, current therapies approved by the Food and Drug Administration (FDA) address only a fraction of defined diseases, reflecting vast and untapped total addressable markets (TAM) awaiting solutions.
“Thanks to their focus on R&D and ongoing advances in life sciences technology, small and mid-cap biotech is poised to deliver numerous short-term breakthroughs across the spectrum of human health, from major causes of death such as heart disease and cancer to rare orphan indications like Huntington’s disease and muscular dystrophy,” the research adds.
Meanwhile, annual healthcare spending in the U.S. currently stands at about $4.5 trillion—17% of GDP—with approximately “a quarter considered waste,” Fiera Apex experts note, attributing this to issues such as inadequate diagnostics and treatments, administrative complexity, and other coordination failures.
Technology
In the tech sector, moving nearly $5 trillion, small and mid-cap firms also stand out, focusing on areas like cloud computing, artificial intelligence, and digital transformation.
Within AI, significant opportunities exist in companies that address the need to control, monitor, and process large volumes of complex data.
As the number and complexity of applications grow with cloud computing and AI, there are opportunities in companies leveraging AI to boost innovation and productivity among professionals. Companies positioned in this space are in the early stages of addressing vast market opportunities.
“We seek companies that can seize the opportunity to replace legacy point solutions with these innovative platforms. This opportunity is especially appealing when considering large industries in the early stages of modernization, such as construction and public administration,” the firm’s researchers say.
As cloud computing evolves into the dominant form of computing in the coming years, there is an opportunity to adopt platforms with modern functionality and data integration, the report concludes.