3 HIGH RISK Australian small-caps you need to know

These stocks are small and unprofitable but could result in HUGE paydays for patient investors.

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Forget Commonwealth Bank (ASX: CBA), Telstra (ASX: TLS) and Woolworths (ASX: WOW). If you’re in the market for high risk/high reward investments, these next 3 businesses could be just what you’re looking for. One is already up 100% in 2014 but all are looking likely to grow well into the future.

Admedus (ASX: AHZ) is a junior diversified biotechnology company living in the shadows of great Australian medical success stories like Cochlear (ASX: COH), CSL (ASX: CSL) and Sirtex Medical (ASX: SRX). After falling 10% yesterday, the market has overlooked the increased likelihood of huge revenue growth in the next 5 years because of a very minor capital raising which will be used to drive its overseas sales teams. With a market capitalisation of only $138 million, Admedus presents itself as a high risk but also high reward investment opportunity.

Another bright small-cap is LNG Limited (ASX: LNG). As the name suggests, it’s involved in the booming natural gas industry. What makes this such a high risk/high reward investment is its ambitions. It hopes to build an 8 million tonne per annum LNG liquefaction facility in Louisiana, USA. However management have taken strides in reducing the chances of failure and have experience from a previous project. Based on the valuations of similar companies gone before it, the market currently ascribes a value of around $US500 million per 1 million tonnes per annum of LNG throughput. With a market cap of only $240 million if they are successful, the reward for patient investors will be substantial.

Lastly, Yellow Brick Road (ASX: YBR) is a favourite of many growth investors because it is an easy to understand diversified financial company and boasts an experienced management team, led by Wizard Home Loans founder and The Apprentice star, Mark Bouris. YBR’s share price has risen strongly in the past month but still has a market capitalisation of only $127 million and remains unprofitable. Its management hope to transform the company into one of Australia’s biggest non-bank lenders in coming years via both an organic and acquisitive growth model. Following in the footsteps of companies such as Mortgage Choice (ASX: MOC) and Magellan Financial Group (ASX: MFG), it’s got an exciting future ahead.

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Motley Fool Contributor Owen Raszkiewicz owns shares in Yellow Brick Road, LNG Limited and Admedus. 

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