Deutsche Bank's Tim Baker says that opportunities in small caps continue to grow - in the year to mid-August large caps were preferred to small caps, and industrials were preferred to resources. The S&P/ASX 300 has been up 20% over the past 18 months, but all of the strength has been in larger stocks. On the other hand, the S&P/ASX Small Ordinaries has underperformed the S&P/ASX 100 by 29%. If is due to smaller companies being at a disadvantage in tough times (e.g. higher cost, weaker market positions), then better growth prospects could mean cheap, overlooked opportunities amongst small caps. Our analysis suggests this could be the case in resources, but for industrials the picture is more complicated. Baker's key stock picks include: Sandfire Resources, Beadell Resources, Drillsearch Energy and Senex Energy. (VIEW LINK)