Diagnostic firms DiaSorin and Biomerier and oil storage company Vopak are three small-cap stocks with promising growth prospects, Dave Dudding, fund manager from Threadneedle Investments, told CNBC.
Small-caps haven't been immune to the weakness brought on by the credit crunch and have been underperforming their larger counterparts, but investors looking for long-term returns can still find strong growth potential, Dudding said.
One key growth area that can be tapped through a small-cap strategy over the next few years is diagnostics, Dudding told “Squawk Box Europe.”
"Diagnostics is one of the fastest growing areas of the health care space, the company that dominates it is Roche, but obviously for Roche it's a relatively small part of the business, so small caps is quite a good way to play it," he said.
Italy's DiaSorin and France's Biomerier have great business models, Dudding said, because they sell machines to labs and to hospitals at a loss, but make strong profits selling the chemicals and add-ons needed to perform tests.
Another small-cap on Dudding's 'buy' list is Dutch oil and chemicals storage company Vopak, as it's an alternative way to play the commodities market.
"It's a hotel for oil or chemicals, so they are completely sold out at the moment and benefitting from some long-term trends," he said, adding "oil and gas is being produced further and further away from the countries that consume it, so the need for storage is going up and they're the biggest independent player."
Threadneedle Investments has a bias towards recession-resistant stocks, but these plays are particularly attractive to those wary of a further economic downturn, Dudding said.