12 small-cap shares backed by top stock pickers

The FTSE 100 has continued to turn heads so far this year, having bust through the 10,000 level as US equities flounder.

As the table shows, the FTSE 100 is now decently ahead of the S&P 500 over five years in sterling terms, reflecting a recent shift in fortunes for the pair.

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Tariff noise, among other issues, has helped to hold back both the US dollar and the S&P 500 since last year.

But it’s not just UK blue chips making an impression. Both the FTSE Small Cap index and the (mid-cap) FTSE 250 roared back to life in the last year and, all being well, have yet more catching up to do on the performance front.

Source: FE Analytics, as of 13/02/2026. Ordered by five-year returns. Past performance is not a guide to future performance.

There is naturally some cause for caution when it comes to small and mid-caps in the UK.

They are, of course, more volatile, and more exposed to the UK economy, which grew by just 0.1% in the fourth quarter of 2025 and could face fresh political instability, among other challenges.

But small and mid-caps should, in theory, offer better growth over the longer term, and the fact they are less well monitored by investment professionals can, so the theory goes, lead to mispricing and a greater number of potential bargains.

Which shares are the professionals buying?

Picking shares here is a risky game, and one that justifies a substantial level of research. Helpfully there are plenty of funds with a dedicated focus on the area, with 45 UK small-cap funds and 21 investment trusts.

These funds vary substantially by approach: some, like Strategic Equity Capital Ord (LSE:SEC) and Odyssean Investment Trust Ord (LSE:OIT), tend to have big stakes in companies and engage with management in a bid to spur on improvements.

Conversely, in many cases small-cap funds tend to spread out risk by having small position sizes and lots of holdings. Small-cap funds can, of course, also differ by investment style and the themes and sectors they target.

Rather than dwelling on the funds themselves, we have looked at what they hold and how this might provide a starting point for your own research. We trawled through the most recent top 10 holding lists for 20 top-performing funds, as judged by total returns over a period of five years.

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Our sample might be skewed in some ways, for example by focusing on those funds that have enjoyed the biggest recent sector or style-related tailwinds.

Also note that the factsheets analysed at the time tend to show how managers were positioned at the end of 2025, with the chance of some names having exited the top 10 since then.

But our research, which details the stocks cropping up most frequently among such funds’ top holding lists, should at least show which companies are drawing the attention of the professionals.

From pension specialists to consumer goods

Small-cap managers can end up backing all manner of niche companies, while also having very distinctive top bets.

That’s reflected in our table: the most popular names appeared in just five top 10 holding lists, from a sample of 20 funds. But the fact they have done so might point to some enduring appeal, as well as a strong run of performance.

There are plenty of different names in our table. At the top, appearing in five lists each, are XPS Pensions Group (LSE:XPS) and JTC Ordinary Shares (LSE:JTC).

XPS Pensions sits in the top 10 holding lists for Strategic Equity Capital Ord (LSE:SEC), VT Downing Small & Mid-Cap Income Inc, JPM UK Smaller Companies C Acc, BlackRock Growth & Recovery and Montanaro UK Smaller Companies Ord (LSE:MTU), as per recent factsheets.

But the company, which offers administration and consulting services in the pensions and insurance sectors, has had a rough year in the market, with its shares down by around a fifth over 12 months.

So, why hold it? Last year the company enjoyed steady revenue growth but had to contend with higher operating costs, while it could benefit from trends such as a boom in pension transfer activity.

Strategic Equity Capital’s last set of full-year results, published in October 2025, described the company as “highly defensive”, noting that it had a “high degree of revenue visibility and largely non-discretionary, regulation-driven client activity”.

Meanwhile, JTC, is a top 10 holding for Downing Small & Mid-Cap Income, JPM UK Smaller Companies, L&G UK Smaller Companies I Acc, Rights & Issues Investment Trust Ord (LSE:RIII) and Janus Henderson UK Smaller Coms I Acc as of the end of 2025, provides fund administration services.

The shares are up by close to 40% over a 12-month stretch but a good deal of this relates to JTC’s board recommending a bid in November last year.

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That reflects a bittersweet scenario for many small and mid-cap investors, where they see promising holdings get taken out by other buyers, if at a decent uplift to the valuation at the time. Thankfully, none of the other names have recommended recent bids, although it is always a possibility.

We limit our table to those stocks that appeared in at least three top holding lists, and this list of 12 shares gives us plenty of variety, from professional services firms like the two most popular names to public services outsourcer Serco Group (LSE:SRP), Premier Foods (LSE:PFD) and Coats Group (LSE:COA). The latter has a fitting name, given its focus on making thread for industrial and consumer use.

Stock pickers often tend to both run their winners and have their biggest allocation to more liquid stocks, which explains why we have ended up with a list of FTSE 250 stocks in the table. Fund managers, do, however, go for companies listed elsewhere, too.

Stocks that appeared on two top 10 holding lists from our sample include Capita (LSE:CPI), a FTSE All-Share name, Everplay Group (LSE:EVPL) and Restore (LSE:RST), both names listed on the FTSE AIM All-Share index.