Just released: our 3 top small-cap stocks to consider buying before June [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a portfolio of at least 15 small-cap stocks.

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When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

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The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

Premium content from Motley Fool Hidden Winners UK

Our monthly Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of small-cap recommendations, to help Fools build out their stock portfolios.

“Best Buys Now” Pick #1:

City of London Investment Group (LSE:CLIG)

Why we like it: “Historically, dividends have made up an important part of the market’s total return, and perhaps for this reason investing for income is popular with UK investors. City of London Investment Group (LSE: CLIG), is a chunky yielder with a long-term record of growing income well ahead of inflation. Although dividend growth at the company has tailed off in recent years, and is largely dependent on the fund manager attracting new client money, we’re optimistic about the company’s attempts to win new business.

“Fund managers generate revenue by attracting investors into their funds and receive fees as a percentage of clients’ assets. One of the attractions of fund managers is that they have significant operational leverage – revenues typically grow at a rate that’s proportional to funds under management, and if costs stay the same, profits should grow at a faster rate. The company is cutting costs and, if a recovery kicks in and sales increase after costs have been reduced, then there’s a chance CLIG might enjoy strong profit growth.”

Why we like it now: Last month, City of London released its first quarter trading update, revealing net inflows of US$224 million across the Group’s strategies. This was driven by strong performance in International Equity strategies at CLIM and Municipal Bond strategies at KIM. These positive results may indicate the company’s resurgence after a challenging period in capital markets. Additionally, as previously announced, cost savings of approximately US$2.5 million per annum are expected to be fully realised in the next financial year. Currently, CLIG is trading with a 9.5% dividend yield. With sales activity showing signs of gaining momentum, the current price appears to offer a bargain.

“Best Buys Now” Pick #2:

Redacted

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Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

The Motley Fool UK has recommended City Of London Investment Group Plc. 

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