Although it has given back a significant portion of its gains in the last month, the S&P/ASX SMALL ORDINARIES (Index: ^AXSO) (ASX: XSO) has still provided investors with a return of almost 8% this year.
I believe the recent decline in the small cap index has created an opportunity for investors to snap up some fledgling companies at more reasonable prices.
Eight shares which the fund managers are tipping to shine in 2017, according to the Australian Financial Review are listed below. Should you buy them today?
BSA Limited (ASX: BSA)
This technical services contracting company has almost doubled in value this year thanks largely to a series of significant contract wins. As well as contracts with the NBN, BSA recently announced a three-year contract with Foxtel. BSA will handle around 50% of the installation and maintenance volumes. At 12x full year earnings I think BSA looks like good value.
CBL CORP FPO NZX (ASX: CBL)
CBL is a New Zealand-based insurer and reinsurer focused on credit and financial risk. Its shares are changing hands at just 10x estimated FY 2017 earnings. At the current price it could be worth a closer look, in my opinion.
Kidman Resources Ltd (ASX: KDR)
This lithium miner has seen its share price rise an incredible 576% in 2016. Whilst I wouldn't expect to see the same sort of return in 2017, if lithium prices continue to rise then Kidman could be in a position to prosper. It is a high risk investment, though.
Nick Scali Limited (ASX: NCK)
Whilst I am a huge fan of this furniture retailer, I do have a couple of concerns. As an importer of furniture a weak Australian dollar will be a headwind for the company. Costs can of course be passed onto the consumer, but if the housing boom subsides and demand drops, Nick Scali may have to absorb these costs and take a hit to its margins.
NRW Holdings Limited (ASX: NWH)
NRW provides diversified services to resource and infrastructure sectors in Australia. As I'm reasonably bearish on commodity prices in 2017 I wouldn't choose to invest in NRW. But if you're bullish on commodities then you could do a lot worse than this engineering company.
Smart Parking Ltd (ASX: SPZ)
As well as a number of other services, Smart Parking provides car parks with digital display signage and high-intensity LED lighting that guides drivers to available spaces. The company is now in 190 car parks worldwide and growing fast. Smart Parking is definitely worth a closer look in my opinion.
TRILOGYINT FPO NZX (ASX: TIL)
Trilogy International is a New Zealand-based manufacturer and wholesaler of home fragrance, bodycare, and natural skincare products. Although it has a lot of promise, due to its mixed first-half result I would hold off an investment until it shows signs of improvement.
Webjet Limited (ASX: WEB)
Webjet won't be classed as a small cap share for much longer if it continues its incredible growth. The online travel agent recently revealed that bookings growth in the consumer market continues to outperform the market by more than four times. As a result, it has forecast EBITDA (earnings before interest, tax, depreciation and amortisation) growth of 62% in FY 2017. Webjet is a strong buy in my opinion.