But the market is looking too high for comfort. Many companies could fail to live up to expectations, which could prompt a sharp correction in their shares.
The good news is that there are still many opportunities to buy into companies cheaply. City experts believe that smaller companies will again outperform the market this year, though stock selection remains of key importance.
Laurence Marsh, a fund manager with Buchanan Partners, says: 'Smaller companies will perform well again as they still haven't caught up with the rest of the market. You have to pick the right stocks but there is still good value around if you look. '
The sector should also attract interest because of an expected rush of new issues.
Companies that have been left behind in the stampede include Atreus, the shower screen and mirror maker, which has languished ever since it was floated at 20p a share last March.
Its disappointing performance is due to a botched placing, which left the market awash with its paper.
First half pre-tax profits to 30 September gushed ahead 22 per cent to pounds 551,000, while earnings improved from 0.85p to 1.02p.
Atreus should benefit from a revival of the housing market. Although the company's growth depends on developing new markets, it is debt-free and should at least match last year's taxable profits of pounds 1.1m.
At 21p, the shares are rated on 10 times earnings and yield about 6 per cent.
Castings, the 100-year-old iron foundry group, has survived many recessions without damaging its solid track record. Last month it reported a 24 per cent jump in interim profits to almost pounds 2m, reflecting improving trading in the motor, building and water sectors.
It also gave the most upbeat statement on prospects in three years and is investing pounds 3m on expansion. Taxable profits of pounds 4.8m look possible in the year to 31 March. The shares, at 220p, are rated on 15 times earnings. It has no debts.
NMC, the US packaging group, is substantially undervalued against the sector, largely because few City analysts cover it.
Interim profits to last September surged ahead by 52 per cent to pounds 4.3m on the back of strong growth at its US subsidiary, UPC.
The company has a good customer base that includes Kraft, the big food group, from which it won a dollars 300m contract in 1992. Economic recovery in US and Britain should ensure taxable profits of about pounds 10m this year. The shares, at 124p, are trading on 11 times earnings.Reuse content