The FE Alpha Manager also believes that long-term cycles in the US economy currently favour firms further down the market cap spectrum.
"I think the country is at the beginning of a manufacturing revival for a couple of reasons," he said.
"The first is that huge amounts of cheap energy, particularly cheap natural gas, are helping US industry, particularly the chemical industry which is already starting to move back to the US."
"This will also benefit consumers, who will get cheaper products in the US."
However Siddles (pictured right), manager of the F&C US Smaller Companies fund, believes the market has already priced in cheap energy, which is why he is looking further down the supply chain to benefit from this theme.
One example in his portfolio is wet barge company Kirby, which transports petrochemicals on the Mississippi River.
"The second factor is the improvement in wage competitiveness compared to China," he continued.
"Wage inflation in China has been very strong for years. The Boston Consulting Group has been on about this for a while and now others have started to get on to the bandwagon."
"Their last report suggested as many as three million extra jobs in US manufacturing will be created as a result of this competitiveness."
Siddles says the US economy has gone through long cycles in which large caps have outperformed smaller companies and vice-versa. He added that since the turn of the millennium the environment has favoured small caps.
He also claims that an inflationary environment has proved to lead to a cycle of outperformance in smaller companies, and that the US is currently experiencing such a cycle.
However, short-term considerations mean investors currently prefer the safety of large caps.
"Investors are currently in two minds about whether to be in large or small companies. From a crisis-aversion view, people want to move into the relative safety of large caps but, as we come out of the recession, smaller caps will beat the market."
"Small caps tend to outperform large caps in long cycles, in periods when high inflation gets out of control – such as the 1940s and the 1970s – or monetary policy isn’t really focused on inflation."
"We have gone through such a period since around March 1999, when we hit the peak of a large cap cycle, and we have been in a small cap cycle since then, albeit with some interruptions."
Unfortunately, FE Analytics data does not go as far back as the 1970s, let alone the 1940s. However, it does show that over the past 10 years US smaller companies have massively outperformed their larger rivals.
Performance of indices over 10-yrs
Source: FE Analytics
Data from FE Analytics shows that Siddles’ F&C US Smaller Companies fund has significantly outperformed its sector average over 10 years, and is the best of the five portfolios in the IMA North American Smaller Companies sector over five.
Performance of fund vs sector and benchmark over 10-yrs
Source: FE Analytics
IMA US Smaller Companies is also the best-performing sector in the IMA universe over three years, pushing IMA UK Smaller Companies into second place.
Robert Love, head of research at Asset Intelligence, commented: "We’d agree broadly, in terms of general economic cycles, that this is a good time to invest in small and mid cap companies as they will outperform in a recovery."
"However, the jury is still out on what will happen in regards to deflation or inflation and what the long-term effects of QE will actually be."
FE Alpha Manager Mick Brewis, who has run the Baillie Gifford American fund since 1997, says the best opportunities in the US market are towards the lower end of his fund's $1.5bn investable scale.
"We do have a bias to mid caps because we think that is where the best opportunities are. That’s where some of the better, sensitive growth stocks are," he said.
"I do not have a point of view on whether large caps are more attractive – that’s not a good way of thinking about it, I prefer to look at the stock-specifics."
Performance of fund vs sector over 10-yrs
Source: FE Analytics
Data from FE Analytics shows that the fund has returned 81.56 per cent over 10 years while its IMA North America sector and benchmark have made 61.43 per cent.
Robert Love rates the portfolio highly for access to the US.
He said: "We like Mick Brewis’ fund and we like Baillie Gifford as a house, as they really are long-term. Lots of companies say that but in their case it really is true – if you look at how long managers have been there for example."
AWD Chase de Vere’s Patrick Connolly says his firm is overweight the US in client portfolios, although he is not as positive as Siddles is about the country's future.
He commented: "For investors, even though over the long-term small caps outperform, they do so by taking on more risk. The right approach is to focus on large caps first before looking at smaller cap funds."