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3 under-researched stocks for your watch list

The Australian Microcap Investment Conference has once again provided investors with a plethora of actionable investment leads.

With company market capitalisations (caps) ranging from the truly tiny AEERIS FPO (ASX: AER) with a market capitalisation of just $7 million to the much larger $400 million panel repair consolidator AMA Group Ltd (ASX: AMA), the one thing all companies had in common was growth potential.

Another important point about these small, growth companies is that for the most part they remain off-the-radar of both brokers and investors. This under-researched situation lends itself to creating opportunity for enterprising investors keen to sniff out opportunities.

Here are three stocks which caught my eye…

Matrix Composites & Engineering Limited (ASX: MCE) was once a $750 million company with a share price north of $10, but today is a relative minnow with a market cap of just $60 million and a share price of 63 cents.

Matrix is a leading developer and manufacturer of subsea buoyancy systems for use in the oil and gas industry. Obviously its business is currently feeling the pressures of reduced capital spending as a result of the weak oil price, however, the company remains profitable and with a strong balance sheet which should see it weather the current storm.

Australian Ethical Investment Limited’s (ASX: AEF) share price is trading close to an all-time high putting the company’s market cap at around $70 million.

Australian Ethical is a fund manager which operates in the growing niche of investment management that meets a range of social, environmental and ethical principles. The company currently has $1.2 billion in funds under management.

IDT Australia Limited (ASX: IDT) has been a great performer for shareholders in the past year with the stock up 85% which has boosted IDT’s market cap to $73 million.

IDT owns and operates a state-of-the-art pharmaceutical manufacturing facility and in 2014 the group acquired a range of US generic drug products which will see IDT expand into the generics market under a distribution agreement with US-based ANI Pharmaceuticals Inc. It has plans to sell the generics into major pharmacy chains such as Walmart, CVS, RiteAid and Walgreens.

Small cap stocks can mean BIG returns

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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