Income investors have failed to notice the star small and mid-cap stocks

Senior Investment Director Thomas Moore of Aberdeen identifies three company stocks that he would invest in

Using an index-agnostic methodology, the Aberdeen Equity Income Trust searches the whole UK market for businesses where investors have not yet fully recognized change. This approach recognizes that understudied market segments, where valuation mispricings are most noticeable, can yield some of the best investment opportunities.

The trust's portfolio consequently frequently differs significantly from other investment vehicles that provide access to UK equity income. At the end of the most recent year, 51% of the trust's assets were held in businesses that weren't part of the FTSE 100 index.

This method gives investors access to the widest selection of income-producing investment options, including numerous stocks with alluring dividend growth and yields. Their prospects may be re-rated to support capital growth as the broader market recognizes them. We think that this index-agnostic strategy has the potential to yield substantial returns as the macroeconomic environment starts to improve and investors start to look beyond the FTSE 100.

An advantageous niche.

A growing order book in specialized infrastructure sectors like water, defense, prisons, and affordable housing puts small construction company Galliford Try (LSE: GFRD) in a favorable position. These initiatives are a top priority for policymakers because they meet social needs, increase productivity, and have a multiplicative effect on the overall economy.

After some high-profile failures, discipline has improved throughout the industry, and fewer contractors are bidding on a fixed-price basis, creating a more logical competitive environment. With operating margins expected to double as the order book grows, this is contributing to steady earnings growth. Galliford Try is an example of a defensive small-cap value stock that provides clear insight into dividend growth and earnings.

The largest inter-dealer broker and over-the-counter data provider in the world, TP ICAP Group (LSE: TCAP), holds a market share of roughly 40%. The business, which is a part of the FTSE-250 mid-cap index, has a strong market position, unparalleled connectivity, and a history of building relationships with elite clients. Due to cyclical tailwinds brought on by interest-rate volatility and geopolitical unpredictability, TP ICAP is a good diversifier for the trust's portfolio. TP ICAP intends to list Parameta Solutions, its expanding data business, on the New York Stock Exchange. This is a significant share price catalyst because it should compel the equity market to assign a value to this asset.

Goldman Sachs Asset Management's private markets division is called Petershill Partners (LSE: PHLL). This FTSE-250 company gives investors access to this rapidly expanding industry by owning shares in 20 private companies. The assets under management at Petershills have grown at a compound annual growth rate of 23% since 2018, which is faster than the industry average. The management anticipates raising an additional £20 to £25 billion in 2025, maintaining their impressive track record of growth.

The stock dropped to about half its book value due to rising interest rate concerns, so we increased our holding. We think that Petershill Partners is a prime example of the deals that can be found in obscure mid- and small-cap stocks.