The Motley Fool

3 of the best small-cap stocks money can buy

Although they may not offer the same level of security as Australia’s blue chips or other well-established growth companies, investing in small-cap stocks with promising futures can be one way to build your wealth exponentially.

While the market rose strongly in 2013, there are still some very attractive offerings at the smaller end of the market which could deliver impressive gains for years to come. Here are three companies that seem the most appealing today:

Select Harvests Limited (ASX: SHV): 2013 was a breakout year for the almond producer as the company focused on cutting costs and improving production rates. While investors might be turned off by its 300% gain over the last 12 months, I believe there are still gains to be recognised. California, which is the world’s largest producing region (producing some 80% of the world’s almond supplies) is currently entering its third year of severe drought which has caused prices of the nut to climb, meaning higher revenues for Select Harvests in 2014 and beyond. Shares are looking very attractive at $5.77 each, while it also offers a 2.6% fully franked dividend yield.

Nearmap Ltd (ASX: NEA): Nearmap provides high-resolution overhead photos and maps of Australian towns, covering 85% of the population. Its customer base is growing rapidly and it recently signed a licencing agreement with Google Maps which will allow customers to view maps outside of Nearmap’s own coverage areas while also giving them access to a greater variety of map-viewing tools.

The mapping company rallied over 800% in 2013 as investors recognised the true potential of its product and it hit a high of 64c on January 23. However, they have since pulled back to 57.5c each, giving investors an opportunity to buy into this quality company. What’s more, Nearmap currently only functions in Australia while it could certainly look to venture overseas in the future.

Admedus FPO (ASX: AHZ) (formerly Allied Healthcare Group Ltd): Admedus is a diversified healthcare company which is investing in and developing next generation technologies of medical devices. One such product is CardioCel, which has been shown to offer a number of benefits in the repair and reconstruction of heart defects with more and more surgeons endorsing the product. Its shares are currently trading for just 16c each, giving it a market capitalisation of $201 million.

Foolish takeaway

While small-cap stocks can deliver enormous gains, investors must recognise that there are additional risks involved with such investments. As such, they should form a smaller portion of any investor’s portfolio.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.