Ten Small-cap Value And Growth Ideas For 2026

22nd Dec by Graham Neary

5 comments 447 reads

In the previous article, I looked at what went right and what went wrong for my watchlist in 2025.

So without further ado, here is my watchlist for 2026.

Again, please note I'm not going into detail here - I endeavour to do that in the daily report!

1. PayPoint (LON:PAY)

The worst-performing share in my watchlist in 2025, I’m going to give it another chance.

Don't try this at home! This is a very contrarian pick - and the share is indeed categorised as Contrarian by Stockopedia’s algorithms. But I can’t resist it at this valuation, especially as it's buying its own shares.

However, to demonstrate that I’m not going to be completely pig-headed about the badly-performing shares from my 2025 list, I’m going to remove Impax Asset Management (LON:IPX) (in which I have a long position) from the watchlist.

There are at least two good reasons for this. Firstly, the company’s EPS forecasts have genuinely been decimated by falling AUM.

But perhaps more importantly, I already have two other fund managers - Mercia Asset Management (LON:MERC) and Polar Capital Holdings (LON:POLR) - and I think this level of sector concentration is not really necessary for what I’m trying to achieve with this watchlist. So Impax Asset Management (LON:IPX) is out.

2. Nichols (LON:NICL)

This Vimto maker might be the least exciting stock in the watchlist, but I like to have a boring, high-quality anchor. I also don’t want to “sell” it out of the watchlist at a moment when it offers more value than it usually does (it's usually .

And it’s not as if it has been failing to maintain its earnings forecasts:

3. Peel Hunt (LON:PEEL)

As noted in the 2025 review article, I don’t understand why the market is treating this so suspiciously. Profits in H1 were enormous relative to forecasts (more than 100% of the full-year forecast was already achieved!) and the estimates in the market are struggling to keep up:

I don’t think this one is priced correctly, so it’s staying on my watchlist.

4. Mercia Asset Management (LON:MERC)

Impax is out, but I’m leaving…

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Revs8

7:26am

Thanks Graham

Still grateful for your identification of International Personal Finance (LON:IPF) as a good investment.

PayPoint (LON:PAY) has had an awful year. Signs that the share price might be stabilising. The value is tempting but I am wary of the increasing debt, used to buy back shares and pay the large dividend, I believe. Do you think this is sustainable? The buyback makes more sense when the share price is suppressed.

Interesting that you feel the IPO scene is about to improve. What makes you think this? The papers will have us believe that businesses are running away from the UK at the moment. (Although it’s often a turning point when the papers are at their most negative).

Looking forward to many more great ideas and analyses for 2026. It’s a significant part of why I’m a subscriber. Thanks Again.

mikebianchi

7:28am

Morning Graham and thanks for all your work in 2025. I already hold four of ten you mention CAV, HSW, PEEL and POLR in fact from 2024 if not 2023. It’s been a long road, perhaps 2026 will see a long awaited return to value. All the best for 2026

Rusty2

33 mins ago

Graham, thanks for the update. A bit surprised that Hostelworld (LON:HSW) is included, you were quite negative back in October: "I’m inclined to sell my Hostelworld shares today, but I haven’t made up my mind yet.".

Charles Mitchell

23 mins ago

Not sure aboutMercia Asset Management (LON:MERC) . I held it for 2 years and it nothing. I think they are more interested in the VCT market as managers than in creating value in the portfolio. I would put it in the same category as Duke Capital (LON:DUKE) , sounds interesting but as an investment offers no return to shareholders.

sparkler

4 mins ago

I really don't want to sound like The Grinch at Christmas so let me start by saying that I genuinely value the work that you, Mark et al put in to your Stockopedia writing throughout the year. It adds value and aids my investment decision making. However (and bear in mind that you did ask for feedback) this list for 2026 looks both uninspiring in its construction and its rationale.

Firstly, let's consider the composition of the choices. Out of ten selections you have two fund managers (having reluctantly removed a third), two stockbrokers and no less than seven stocks that could be categorised as 'financials'. I appreciate that your remit was not to offer a balanced portfolio but where are the interesting stocks in engineering, healthcare, technology etc etc?

Secondly, whilst acknowledging that you and the other members of the team put out quite prodigious amounts of content I think you still needed to add more colour to these ideas. For example, we all know that fund managers are 'cheap' because they are largely losing assets under management. We also know that stockbrokers are cheap because bumper profit years are usually followed by weak ones and so the earnings get rated accordingly. What you haven't done, Graham, is give much in the way of reasons why your individual selections should outperform the rest of their sector or the market. I like to see clear catalysts to drive a share price higher and I don't see them here. Sorry to be negative and good luck to all readers investing in 2026.

Ten small-cap value and growth ideas for 2026

1. PayPoint (LON:PAY)

2. Nichols (LON:NICL)

3. Peel Hunt (LON:PEEL)

4. Mercia Asset Management (LON:MERC)

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Graham Neary

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