The Motley Fool

Here are 3 small-cap stars I’ve added to my watch list

Many of the most popular blue-chip shares on the ASX have performed extremely poorly in the last couple of years. Some have grown their earnings at a much slower-than-normal rate and some have even gone backwards.

Because of this I think investors should look beyond traditional blue-chips such as Woolworths Limited (ASX: WOW) and Telstra Corporation Ltd (ASX: TLS) and focus on the smaller side of the market.

Although small-cap shares carry greater risk than their blue-chip peers, I believe if you choose wisely you can go some way to limiting this risk.

Three small-cap stars which are at the top of my watch list right now are as follows:

The Australian Vintage Limited (ASX: AVG) share price is currently hovering just above its 52-week low. The wine company’s share price declined sharply this year after its half-year results were impacted significantly by the Brexit. Although volumes rose, revenue fell 8% to $119.3 million as a result of unfavourable exchange rates. Whilst things are unlikely to get easier for the company in the UK any time soon, I expect sales into Asia and its distribution deal in the United States could help offset this weakness.

The Amaysim Australia Ltd (ASX: AYS) share price has fallen around 11% this year despite a reasonably solid half-year result which revealed a 34% increase in mobile subscribers. But the big news from the earnings release was that the long-awaited launch of its NBN service is just around the corner. I believe its asset-light model will allow Amaysim to undercut the bigger players whilst still remaining profitable. If the company can disrupt the home broadband market like it did the mobile phone market, I feel there could be significant growth ahead.

Despite a big decline last week, the Tassal Group Limited (ASX: TGR) share price is up over 9% this year. The leading salmon producer’s share price took a hit last week after it completed an $80 million placement of shares at a price of $4.55 per share. But I feel confident that management’s plan to invest the funds in a range of working capital and capital investment initiatives will ultimately bring value to shareholders. Due to supply issues, global salmon prices are on the rise. If these high prices are sustained then I expect Tassal will be in a strong position to grow its bottom line at an above-average rate over the next couple of years.

5 stocks under $5

We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.

And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

*Extreme Opportunities returns as of June 5th 2020

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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.

Related Articles...

Latest posts by James Mickleboro (see all)