Two small cap stocks I am banking on in 2015

Our sharemarket has posted a solid start to the year but there are two small cap stocks I am counting on to help me beat the market in 2015. Click to find out what they are…

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The strong gain by the top 200 stock benchmark since early December shows the price overcautious investors are paying for sitting on the sidelines.

There have been great worries that the Santa Rally in 2014 would not come but those fears have given way to optimism with the S&P/ASX 200 Index (ASX: XJO) recording returns of nearly 3% since Christmas.

That makes for a pretty solid start to 2015. I think there’re still great opportunities in the share market, and I am counting on two small cap technology stocks to put me ahead of the broader market.

In no order of importance, these stocks are medical device developer Impedimed Limited (ASX: IPD), and wireless device maker NetComm Wireless Ltd (ASX: NTC).

Impedimed is trading close to a record high but the stock still looks cheap given the size of the market opportunity for its unique lymphedema testing device. Lymphedema is the buildup of excess fluids in the limbs that is relatively common with patients who have undergone chemotherapy.

If not detected early enough, lymphedema often leads to amputation of the affected limb, if not death.

Impedimed has struggled for years to commercialise its test device, which is the most effective way to detect the condition, before its current chief executive Richard Carreon finally put the company on the right path.

The addressable market opportunity in the US alone for Lymphedema is estimated at $US1.3 billion, and this could expand to three times that amount if Impedimed’s technology is applied to other medical and non-medical opportunities.

Despite this, Impedimed has a market capitalisation of under $250 million. I believe the share price will jump to well over $1 in the coming months. Impedimed will file its quarterly result sometime this week, which could prove to be a catalyst for the stock.

Last year wasn’t particularly good to NetComm with the stock peaking at around 80 cents before falling by over 40% to 46 cents.

There isn’t anything fundamentally wrong with the company or its growth story, and I expect to see renewed interest in the stock when management gives further guidance on the opportunities ahead.

NetComm supplies communication chips for the machine-to-machine (M2M) market and it is the exclusive provider of wireless dishes to the National Broadband Network (NBN).

M2M refers to devices that can communicate to other devices and includes smart meters and remote medical monitoring and contactless payment solutions.

NetComm has secured an exclusive partnership deal with Vodafone.

Like Impedimed, the potential market for NetComm is measured in billions while NetComm’s market cap stands at under $60 million.

It is also worthwhile noting that the technology risk for both companies (the risk that their products do not work as intended) has been largely addressed.

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Motley Fool contributor Brendon Lau owns shares in Impedimed and NetComm Wireless.

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