3 small caps to give your portfolio a big boost

Credit: StephenMitchell

I believe it is fair to say that year to date the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has thoroughly underwhelmed. As of yesterday’s market close, the benchmark index that includes 200 of Australia’s biggest and brightest companies was down by 0.3% in 2016.

Whilst the big shares may have stalled this year, the smaller shares have definitely been working on overdrive. The S&P/ASX Small Ords Index has outperformed its illustrious rival and climbed by an impressive 7% in 2016.

There are three key shares on the S&P/ASX Small Ordinaries that I believe investors should pay close attention to. Who knows, they might one day be part of the S&P/ASX 200. They are as follows:

Hansen Technologies Limited (ASX: HSN)

Hansen Technologies develops and supports customer care and billing solutions for a range of customers based in the energy, pay TV, and telecommunications service industries worldwide. What I especially like about Hansen Technologies is that it has a tendency to create long-standing relationships with its clients. In fact, the 30 pay TV operators that the company has on its books have an average tenure of 11 years. The company recently announced that it has executed a non-binding letter of intent to acquire US-based energy billing services company PPL Solutions from NYSE-listed PPL Corporation. Management expects PPL Solutions to represent approximately 5% of company EBITDA if the transaction proceeds. Funded from its cash reserves this looks likely to be a good move by the board.

Nextdc Ltd (ASX: NXT)

NEXTDC is an operator of data centres in many of Australia’s largest cities. I believe that thanks to growing demand for cloud-based data storage and access, NEXTDC is a company to keep a close eye on in the future. The company has been busy growing its network and last month announced that it had secured two new strategically important sites. The first site is close to a major electricity substation and telecommunications infrastructure in Tullamarine, Melbourne. The second site is in Brisbane located in Fortitude Valley on the fringe of the CBD and close to a major electricity substation, as well as significant telecommunications and public transport infrastructure. Although it is yet to turn a full year profit, I believe this growing company will become more profitable as it scales up.

Sealink Travel Group Ltd (ASX: SLK)

SeaLink Travel is a provider of ferry services in key tourist hotspots such as Sydney Harbour and Kangaroo Island. It recently added further geographic diversification to its services with the acquisition of Captain Cook Cruises Western Australia. The acquisition means the company now carries 7 million passengers per year across its fleet of 72 vessels. I believe SeaLink is positioned to take advantage of the weak Australian dollar and the growth in tourism into Australia that it brings with it. In my opinion SeaLink could be a great addition to your portfolio today.

Finally, I believe you could team one of these three exciting new breed blue chips with the small cap shares to really give your portfolio a lift.

It's definitely worth taking a couple of minutes to get better acquainted with them if you ask me.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Hansen Technologies. 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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