5 stocks for less than 20 cents

There’s an old saying that states ‘good things come in small packages’ and while there is certainly no law saying this must hold true, it is certainly the case that significant wealth can be attained by investors who discover a micro-cap (capitalisation) stock which goes on to become a large-cap stock.

Here are five stocks with small share prices (less than 20 cents) and small market caps that could one day grow into much larger companies.

1)      Adslot (ASX: ADJ) is an $80 million company focused on using technology it has developed to allow media publishers to sell their advertising inventory directly to advertisers. The company has had some good wins during 2013, including the signing of an agreement with news site Mail Online.

2)      TZ (ASX: TZL) has a market capitalisation of $29 million and is looking to roll-out technology solutions including parcel lockers to help customers receive their online purchases in a timely and convenient manner. TZ is chaired by entrepreneur Mark Bouris, who was the founder of Wizard Home Loans.

3)      Corum Group (ASX: COO) is a software company with a market cap of $32.5 million. Corum focuses on developing software for point-of-sale and pharmaceutical dispensing. While the company reported solid financial year (FY) 2013 results, guidance for FY 2014 suggests profits will be substantially lower due to increased labour costs, increased amortisation of performance rights and higher income tax. Management has also provided guidance that it expects a dividend of one cent per share to be declared in FY 2014, which equates to a dividend yield of 7.7%.

4)      Praemium (ASX: PPS) is also a software company, however its focus is on providing investment portfolio technology. The company recently completed an acquisition and also surpassed $1 billion in funds on its software platform.

5)      Atcor Medical (ASX: ACG) has a market capitalisation of $25 million and reported a significant increase in its revenues for FY 2013 to $9 million from $6.4 million the previous year. The company has developed a system for non-invasively measuring central blood pressure and arterial stiffness. Investors will be watching the company closely to see if revenues continue to grow at high rates this year.

Foolish takeaway

Picking winners is no easy task but with diligent analysis and by utilising a portfolio approach, outperforming the market by buying micro-cap stocks is possible.

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Motley Fool contributor Tim McArthur owns shares in Corum Group.

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