Volatility hands active pickers an edge on micro-caps

Binaya Dahal

Journalist

24 March 2026

The sharp disparity between winners and losers, driven by market volatility, has created an attractive opportunity across the small and micro-cap universe for active stock pickers, according to Jack Briggs, Portfolio Manager at Ellerston Capital.

Briggs, who oversees the Australian micro-cap fund at the investment manager, said the latest downturn even degraded the resilient companies alongside weaker peers, and helped create mispriced opportunities in the market.

“The recent indiscriminate sell-off in technology has, in our view, created several attractive entry points in fundamentally strong businesses that have been caught up in the broader market decline,” Briggs said.

“Volatility has also allowed us to buy stocks we like at better prices. Situations where fundamentals remain strong but share prices have fallen due to sentiment create opportunities for investors willing to look beyond short-term noise.”

He said the shift coincides with persistent inflation pushing investors away from expensive growth stocks towards defensive sectors such as consumer staples and utilities.

Briggs, however, cautioned that broad sector rotations can mask company-specific fundamentals, particularly in less-researched parts of the market such as micro-caps.

Furthermore, Ellerston’s global Portfolio Manager, Nick Markiewicz, said dispersion between the stocks has also reached near historic highs.

“The dispersion is at a level similar to the global financial crisis and the dotcom bubble, as analysts have grouped the latest earnings results into AI ‘winners’ and ‘losers’ buckets, rather than trying to explain trading performance by sector or quantitative factors,” Markiewicz said.

Ellerston Capital said such conditions favour active managers, particularly in under-analysed segments where pricing inefficiencies can persist for longer.

The manager highlighted construction materials group Wagners as an example, after its shares rose 30% in January following stronger-than-expected earnings and upgraded guidance.

The company benefited from solid demand across its cement, concrete and quarry operations, alongside growing infrastructure activity in south-east Queensland.

Despite these shifting market dynamics, Briggs said the fund remains focused on companies with strong balance sheets, pricing power and sustainable growth drivers.

He added the strategy targets opportunities with a three-to-one risk-reward profile and the potential to deliver annual returns of about 15% over the medium term.