Over the last 15 years, sell-side analyst coverage has collapsed for everything below mega cap. While mega caps gained 57% more US analyst coverage (and 48% non-US), other segments experienced meaningful reductions:
Large cap: US coverage down 7%, non-US down 22% Mid cap: US down 25%, non-US down 37% Small cap: US down 24%, non-US down 39% Micro cap: Essentially flat, already near zero
Brokerage economics increasingly favor covering a handful of trillion-dollar companies over doing the hard work of researching smaller businesses around the world. As a result, non-US small caps now average just 3.5 analyst recommendations, down from 5.8 in 2011, representing a notable decline in external research coverage.
Why does this matter? Lower levels of analyst coverage have historically been associated with less efficient pricing. We believe that less efficiency means more opportunity for active managers willing to travel the world, visit factories, meet management teams, and build proprietary research.
At Grandeur Peak, this is exactly the space where we’ve built our firm. Our investment approach is focused on segments of the market that receive comparatively less sell-side attention.
We believe that the trend toward passive investing combined with shrinking sell-side research creates a structural tailwind for disciplined, boots-on-the-ground active management in smaller companies across the globe.
It is our view that the inefficiency isn’t going away. If anything, it’s expanding.
Source: Refinitiv, January 2011 – December 2025. Mega cap > $200B, Large cap > $10B, Mid cap > $2.5B, Small cap > $500M, Micro cap < $500M.
This post is for information and educational purposes only and expresses our opinion and view of the market and is not a recommendation to transact in any securities.