Cazenove's Marriage: Five small caps to back for 2012

Paul Marriage, manager of Cazenove’s £91m UK Smaller Companies fund, names five smaller companies set to outperform in 2012.

The Smaller Companies sector has taken a battering in the latter part of this year, losing 14.62% on average since August, according to Morningstar.

However, small-cap fund managers say investors should not lose sight of the fact the sector should be seen as a long term investment.

Marriage has protected against the downside by increasing positions in his high conviction names. His fund has returned 129.6% over three years, against an average return of 88%, and made 6.8% over one year, against an average loss of -4.1%.

Here are five of his favoured stocks:

1. Vitec Group - The Cazenove manager has had a long term holding in this camera equipment manufacturer, which he sees as benefiting from an interesting new product range. He expects the company to enjoy a boost from upcoming events, including the Olympics, Golden Jubilee and the US election.

2. Perform - The sports media distributor had an IPO last year. Marriage avoided it at IPO stage but bought it shortly afterward. He sees the UK company benefiting from increasing numbers of people watching sport online globally.

3. Andor Technology - The scientific camera manufacturer has a dominant position within its sector. Its innovative product range has positioned the company well for growth in 2012, said Marriage.

4. Domino Printing - This is a company with a long history of careful management and profit growth. The recent investment in Ten Media also puts the company in an excellent position to benefit from new US food safety legislation.

5. Xaar - This company is the world leader in digital inkjet printheads for industrial applications and 2012 should see strong growth from take up of this technology in new markets such as Ceramic tile printing.