Accurately picking tomorrow's blue-chips is far from an easy task. While there are plenty of small stocks which can carve out profitable niches for themselves, they'll never grow into powerhouses that are deserving of blue-chip status.
There are however certain small companies which operate in industry segments that offer very large growth potential. The type of growth which could see a small stock grow (in time) into a very large, blue-chip stock.
Here are three stocks worth keeping an eye on:
Capitol Health Ltd (ASX: CAJ) is a provider of diagnostic imaging services throughout Victoria. It currently has a market capitalisation of $265 million but there is scope for Capitol to continue to expand via its strategy to roll-up independent service providers. Capitol's much larger peer Sonic Healthcare Ltd (ASX: SHL) boasts a market capitalisation of over $7 billion and has successfully expanded both organically and via acquisition throughout Australia and overseas. While it won't be easy, in time there is the potential for Capitol to grow its operations and expand its services just as Sonic has done.
Freedom Foods Group Ltd (ASX: FNP) operates in the niche area of specialised food manufacturing and brand marketing. While this is a niche, it is a very large niche with significant global opportunities. The company has enjoyed a meteoric rise and now has a market capitalisation of around $450 million. A successful expansion into the USA and other regions such as Asia and Europe would allow the firm to undertake a step-change in manufacturing volumes and potentially grow into a large consumer staples business.
Ardent Leisure Group (ASX: AAD) isn't so small anymore thanks to its share price gaining 70% over the past 12 months – those gains have taken the stock to a market capitalisation of $1.3 billion. As an operator of leisure businesses such as theme parks and health clubs, Ardent not only owns a number of appealing assets on which it enjoys pricing power, but it also has plenty of scope to acquire new assets under its operating structure.
