Analysts at Berenberg have selected a 'top 15' stock picks from their global small and mid-cap universe, including London-listed Asos, CVS, Greencore, Sanne Group and Scapa.
After last year's mixed market performance, Berenberg sees 2017 as promising both significant economic opportunities from US domestic demand, but also political and economic uncertainties from the UK's Brexit and elections in France and Germany.
"In volatile markets, companies with a strong business model, a tight focus, real value-add and sustained growth in excess of that which the general economy has to offer, should continue to outperform.
"We believe that these companies can primarily be found in the small and mid-caps space," the bank said, referring to those with a market capitalisation below 5bn.
In its high-growth theme, online fashion retailer Asos is a top pick due to its prime long-term structural positioning as the sector continues the digital transition, with the AIM-listed company's niche-focus, multi-brand strategy, agile supply chain and operational strength putting it in a "highly defensible and differentiated competitive position".
The valuation has not fully taken into account the total market opportunity as Berenberg sees it, as the ongoing investment in the customer proposition "can drive top-line growth of 20-25% pa over the next five years", which comparison with New Look indicates a potential £1bn in sales from the UK alone through the ongoing product expansion.
Likewise, Greencore, the UK and US sandwich and other convenience food maker with a market cap around £1.4bn, is seen as well positioned for organic growth in the coming 24 months at least and although UK margins may come under pressure in the short term, the business is insulated from the majority of input cost movements thanks to pass-through agreements with most customers.
The company's 7% compound annual growth rate for 2017-19 offers unsurpassed visibility, while three-year earnings per share CAGR of 8.4% and on 12 times 2018 earnings it offers "among the best value for growth in our food coverage".
Third in the high-growth share theme, Sanne, the provider of outsourced corporate and fund administration, reporting and fiduciary services, has tripled in size to near-£600m since floating in 2015, with two sizeable acquisitions in the US and Asia-Pacific in the past six months giving it "scale to address a broader range of global clients and further accelerate its growth in 2017".
Sanne garners long-term demand from regulatory developments such as AIFMD, FATCA and MIFID and Berenberg sees this and its unique exposure to the growing regulation of the alternative assets industry generating three-year revenue CAGR of 30%, while acquisitions offer earnings accretive potential in the relatively immature but developing US and Asian markets.
Not explicitly coming under an investment theme, veterinary services chain CVS is seen as one of the strongest structural growth stories in analysts' UK mid-cap coverage as acquisitions accelerate and the company continues to pursue consolidation opportunities in growing markets in the UK and Netherlands.
More than 80 acquisitions in the last 18 months is a major step-up from the 20 a year the company historically made and while intensifying competition from private equity operators pushed up the multiples paid for assets slightly, the expansion of the company's own multiple continues to make these deals "highly accretive" to earnings.
A move into the 550-600m, highly fragmented Dutch market in the 2017 financial year leads Berenberg to believe CVS has the opportunity to build a significant position there through acquisitions, while also benefiting from the procurement benefits it generates from its UK operations.
Finally, Scapa, the global manufacturer of bonding products and adhesive components is nearing a £500m market cap after strong gains last year and, while many feel the shares
are expensive, newly revised margin targets are yet to be reflected in consensus forecasts and Berenberg spies potential acquisitions in healthcare to come.
In a blue sky scenario that foresees 5% top-line growth, 14.5% long-term EBIT margin and cost-savings from site closure, yielding a price target of 470p versus the current 350p.
European and US picks include Criteo and Wirecard in the high-growth theme; Hypoport, EDAG Engineering and DeLonghi in the 'growth at a reasonable price' theme; Grand City Properties and SPIE for value; O2 Czech Republic and Rubis for yield; and Duerr as a final 'editor's pick'.