6 exceptional smaller stocks with exciting growth prospects

As the saying goes – From little things, big things grow!

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With Perpetual Limited (ASX: PPT) receiving the 2014 Morningstar Fund Manager of the Year award it certainly makes sense to review some stocks its market-beating team of portfolio managers have selected.

Given smaller stocks often have longer and faster growth profiles, "small caps" can provide a significant boost to long-term portfolio returns. Two funds managed by Perpetual that focus on stocks with smaller market capitalisations are the Pure Microcap Fund and the Smaller Companies Fund.

Here are six stocks owned by at least one of the above two funds or others that appear to have exciting future growth prospects.

1)      G8 Education Ltd (ASX: GEM) continues to expand its childcare centre portfolio via acquisitions on attractive multiples. The company still only has a small percentage of the overall market which provides for further significant growth potential.

2)      Affinity Education Group Ltd (ASX: AFJ) is a newly listed competitor to G8. Interestingly Affinity is currently the largest holding in the Microcap Fund, while G8 is currently the largest holding in the Smaller Companies Fund.

3)      eBet Limited (ASX: EBT) provides software solutions to the gaming industry. With a tailwind of growth in the gaming industry and significant leverage to higher revenues, eBet could enjoy similar success to its larger peers in coming years.

4)      Mermaid Marine Australia Limited (ASX: MRM) is currently trading near its 52-week low having suffered from lower vessel utilisation. The recently announced strategic acquisition for approximately $449 million of Jaya has the potential to be a company transforming acquisition and could act as a catalyst for the stock.

5)      Infomedia Limited (ASX: IFM) has cleverly positioned its suite of software products to have global appeal and importantly to offer increased efficiency and productivity for its clients. With many potential clients still to switch to the more modern Infomedia product offering, its pipeline of future growth looks good.

6)      Vocus Communications Limited (ASX: VOC), Perpetual funds have built a significant holding in this super-fast internet provider, trading shares over the first two months of 2014.

Foolish takeaway

As the saying goes – From little things, big things grow – this can hold true for companies too. Identifying smaller companies with decent growth prospects can lead to long-term gains for investors.

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »