Best Small Cap Stocks UK to Watch in 2023

Jitanchandra Solanki
8 Min read

Discovering untapped potential and seeking growth and diversification can be a rewarding experience for investors interested in the world of small-cap stocks.  

In this article, we'll explore what small-cap stocks are, some of the best ones to watch in the UK, and how to get started.

We will also examine the risks associated with small-cap stock investing. Read on to get essential information on small-cap stocks and how to make informed decisions in this compelling investment sector.

What Are Small Cap Stocks UK?

Small cap stocks refer to companies with a relatively small market capitalisation, or market cap, which equals a company’s share price times the number of shares. Typically, small-cap stocks have a market cap between £50 million and £250 million. Other categories for classifying company stocks by market capitalization include micro-cap, mid-cap, large-cap, and mega-cap stocks. 

UK small-cap stocks are companies that are listed in the FTSE SmallCap index, are outside the FTSE 350 index and represent around 2% of the UK stock market capitalisation. For this article, we will only discuss some of the best small-cap stocks to watch in the UK.  

These relatively smaller companies can offer interesting opportunities especially compared to large or mega-cap stocks, as they are often more agile and able to quickly adapt to changes. However, they also come with various downsides and other risks which we will discuss further in this article. 

Best Small Cap Stocks to Watch in the UK

Keeping track of quality small-cap stocks can help investors diversify their investing portfolios and potentially benefit when small-caps start growing. Here are some small-cap stocks to watch in the UK in 2023: 

  1. Gym Group PLC - Low-Cost Gym Facilities in the UK Founded in 2007
  2. 888 Holdings PLC - A Leading Betting and Gaming Company
  3. Metro Bank PLC - Award-Winning Financial Provider and Retail Bank

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Gym Group PLC - Low-Cost Gym Facilities in the UK Founded in 2007 

The Gym Group PLC is one of the UK’s largest and fastest-growing low-cost gym operators. The company has been growing in recent years with a +63.1% increase in revenue over 2022 compared to the previous year. Gym Group PLC’s stock price performance has struggled in recent years and is trading close to its all-time low price.

888 Holdings PLC - A Leading Betting and Gaming Company 

888 Holdings PLC is one of the world's leading betting and gaming companies, running a roster of internationally renowned brands such as William Hill, 888, Mr Green, and SI Sportsbook.  

With over 6 million customers annually from over 100 countries, and active in 22 regulated markets, the company combines the offering of a wide range of gambling and betting products with attention to responsible gaming and a safe and secure environment for customers.  

Although the 888 Holdings PLC stock price has seen great heights historically, it is now trading significantly lower and closer to its all-time low from 2011. However, the company has a solid market position in a sector - online gaming and gambling - that is growing every year, making it an interesting stock to watch this year. 

Source: Admirals MetaTrader 5 Web. 888. Monthly. 1 Sep 2005 - 25 Apr 2023, accessed on 25 April 2023. Please note that: Past performance is not a reliable indicator of future performance.

Metro Bank PLC - Award-Winning Financial Provider and Retail Bank  

Metro Bank PLC offers a fresh way of banking by focusing on optimizing the customer journey and offering clients the best service possible using technology-driven innovations.  

Although Metro Bank has faced serious challenges in the past, the bank has started to overcome those challenges. However, while the stock price surged more than 130% higher from October 2022 to February 2023, the stock is down 98% from its all-time record high in 2018. 

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How to Find UK Small Cap Stocks

Are you wondering how to find small-cap stocks in the UK? One way to do this is by using the FTSE Small Cap Index on the London Stock Exchange, which provides a handy list of small-cap stocks, making it easy to identify small-cap firms. 

However, it's important to keep in mind that you should conduct your own research and risk management when selecting small-cap stocks to buy. Investing always comes with risks, so you need to investigate the company's financial numbers and performance, management team, industry outlook, and growth potential. Comprehensive research and due diligence are essential. 

Why Invest in Small Cap Stocks?

Why would someone choose to invest in small-cap stocks when there are also stocks from well-known companies with huge market capitalisations available?  

Small businesses are generally more agile and adaptable to changing market situations. If a small-cap stock company succeeds in finding the right opportunity and capitalising on it, then the value of the stock could rise.  

However, investing in small-cap stocks also comes with increased risks and volatility. If you're a trader who likes to keep risks as minimal as possible or isn't comfortable with a stock price fluctuating greatly, small-cap stocks might not be the right choice.  

When buying small-cap stocks, a balanced approach is required, considering both the possible rewards and risks involved, with more emphasis on the latter. 

Conclusion 

When you want to diversify or expand your portfolio, UK small-cap stocks might provide additional possibilities to investors. Small-cap companies may provide various advantages, including stronger growth prospects and exposure to growing markets and industries, although this comes with risks of higher volatility and big crashes in the stock price. 

As an investor, you can make informed judgments about the best small-cap stocks to watch by considering factors such as company performance, industry outlook, and risk management. Small-cap companies can become an important part of a well-rounded investment strategy with careful research and a balanced approach. 

A good way to get started is to trade small-cap UK stocks on a demo trading account. This allows you to buy and sell in a virtual environment until you are ready to go live.  

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FAQs on Small Cap Stocks UK

 

What is a small-cap stock in the UK? 

Small-cap stocks in the UK refer to companies with a market capitalization ranging from around £50 million up to £250 million. These companies, often in the early stages of development or operating in niche areas or emerging markets, may present unique investment opportunities. However, small-cap stocks, in general, exhibit higher volatility and risks compared to large-cap stocks.

 

How can I invest in small-cap stocks? 

To start investing in small-cap stocks, thoroughly examine a company's financial results, management team, and the forecast of the industry they are operating. To identify small-cap stocks of interest, you may use indices like the FTSE Small Cap Index as a starting point. Consider starting out with a demo trading account to practice small-cap stock investing before committing to real funds. 

 

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