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6 little battlers for your small-cap portfolio

LogiCamms Limited (ASX:LCM) is a well-regarded engineering and consulting services company. Areas of expertise include hydrocarbons (oil & gas) and asset performance (improving return on investment). With a host of big name clients (BHP Billiton Limited (ASX: BHP), Chevron Corporation (NYSE: CVX), Origin Energy Limited (ASX: ORG) etc) Logicamms is well positioned for any recovery in the resources sector. Although the first half of 2014 will be ordinary, expectations are for a strong second half. At $1.05 the expected dividend of 8c (7.6% fully franked) is icing on the cake.

Netcomm Wireless Ltd (ASX:NTC) is a technology hardware manufacturer whose products (routers and so on) are well known to consumers. Now transitioning to supplying the M2M (machine to machine) market, Netcomm is catching the wave of new applications riding high-speed broadband – for example remote health monitoring, smartcards, point of sale terminals and so on. Although Netcomm has been around for some time it hasn’t been particularly profitable, even in the good years. However the transition to fast growing areas such as M2M indicates a positive outlook for this company. The potential is there and the current share price of 36c underrates the prospects. No dividend can be expected in the medium term.

Onthehouse Holdings Ltd (ASX:OTH) is a ‘second generation’ real estate portal modelled on the highly successful North American Zillow. Onthehouse has two divisions: 1) a subscription-based service for real estate professionals and other interested parties. 2) A content rich free consumer service (supported by advertising) which has 13 million properties on its books. Management claims the consumer division site is broadly comparable to the ASX site – where detailed information can be looked up easily. At a share price of 53c Onthehouse is a very good speculation.

Sundance Energy Australia Ltd (ASX:SEA) is a North American-based shale oil and gas producer, currently finalising a NASDAQ listing. This company is more of a medium than small cap, with very solid prospects in its areas of operation. With an increasing number of producing wells and easy access to the necessary infrastructure, Sundance Energy ($1.06) is well placed for significant price gains within the next two years.

Melbourne IT Limited (ASX:MLB) offers internet related services such as critical web hosting, online brand protection and enterprise services for a wide range of customers. Following a recent 54cent capital return, Melbourne IT shares are now selling at $1.32. Trading conditions have been difficult for this company in recent years and it is currently engaged in extensive restructuring of the business. Both the financial position and management capability are good and Melbourne IT appeals as a recovery situation with a reasonable franked dividend.

Paragon Care Ltd. (ASX:PGC) is a provider of durable equipment and furniture for the aged care and health markets. With the recent acquisitions of LR Instruments and Richards Medical, Paragon Care is now one of the leading suppliers of surgical instruments and medical consumable products. This is a small company involved in a high-growth industry. Selling at 36c and capable of paying a dividend this year, Paragon Care appeals as a rewarding investment over the medium term.

Foolish takeaway

Small companies can be sweet and lucrative for the dedicated private investor. Under researched and frequently unloved they present constant opportunities if you’re prepared to take the time to assess them. In my experience well selected smaller companies offer more growth (capital & income) and I try to hold 50%+ of my portfolio in the small ordinaries. Although they don’t have the ‘earnings certainty’ of a mega-company, they can offer the investor greater compensations over the medium and longer term – especially in times like the present.

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Motley Fool contributor Peter Andersen owns shares in Logicamms and Sundance Energy

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