While a select group of Australia’s largest stocks garner the bulk of the market’s attention the vast majority of Australian-listed stocks go unnoticed by most market participants – often because they’re too small to be tracked or monitored by the fund managers or other financial firms.
Although it is important to have some exposure to Australia’s biggest stocks, gaining exposure to smaller stocks can be one of the greatest ways to build your wealth over the long term. Indeed, they maintain the capacity to generate larger returns than their behemoth counterparts and offer the added benefit of not having (yet) attracted all the big-name investors who can tend to push the price up considerably.
With that in mind, here are four small-cap stocks that are worth your attention right now.
- Somnomed Limited (ASX: SOM) provides treatment solutions for sleep-related breathing disorders, including obstructive sleep apnea (OSA). While it will be difficult to knock larger rivals ResMed Inc. (CHESS) (ASX: RMD) and Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) off their perch in the market, Somnomed’s products are significantly cheaper and less invasive which could be preferred by many sleep apnea sufferers. With strong growth forecast, Somnomed could be a great pick-up at $2.47 per share.
- 1-Page Ltd (ASX: 1PG), which is based in San Francisco, became the first Sillicon Valley company to list on the ASX late last year due to the generous tax concessions for research and development offered in Australia. 1-Page is a recruiting technology company which is aiming to solve the communication problem between enterprises and their present and future employees. It has skyrocketed since its market debut and now boasts a market capitalisation of $107 million, although management has a goal to become a US$1 billion ($1.3 billion) NASDAQ-listed company, highlighting its confidence in future growth.
- Vocation Ltd (ASX: VET) is Australia’s embattled education provider that has shed 97% of its value over the last nine months to trade at just 10 cents per share. There has been a management overhaul and the corporate structure has been completely reshaped, giving management the confidence they can return to profitability. Indeed, this is a speculative bet and only made this list due to its potential to become a turnaround stock. Most ‘Foolish’ investors will likely choose to remain on the sidelines until it has proven its ability to return to growth.
- Catapult Group International Ltd (ASX: CAT) is only marginally bigger than Vocation but has significant growth potential. Catapult is a global sports analytics business which tracks and monitors the players’ performance on field with the help of various devices. Its products are used in sports including AFL, soccer/football, rugby league, rugby union and even cricket. While it is yet to generate a profit, Catapult Group is well worth your consideration, and at least deserves a position on your watchlist.
Of all these companies, I would be most inclined to buy shares in either Somnomed or Catapult Group at today’s prices, although 1-Page is on my long-term watchlist as well. Before you consider buying any of these companies however, there are two other ultra-promising small-cap stocks with enormous potential that could be even greater buys today.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.