The Motley Fool

Four small cap stocks to beat the market in 2018

While Australian investors may lament the underwhelming performance of the S&P/ASX 200 (Index: ^AXJO) (INDEXASX: XJO) relative to most major overseas indices in 2017, it’s important to remember the index’s heavy weighting towards the Big 4 banks. While the Big 4 continue to underperform, the S&P/ASX SMALL ORDINARIES (Index: ^AXSO) (INDEXASX: XSO) has instead risen 16.5% over the past twelve months.

I expect bank stocks to struggle again this year, so below I’ve highlighted four small cap companies I believe can help investors beat the market in 2018.

Jumbo Interactive Ltd (ASX: JIN) sells lottery tickets through its website. The company recently revised first half FY2018 trading update; stating revenue and net profit after tax for the period is forecast to increase 20% and 43% respectively.

Jumbo’s chief risk is its reliance on the TattsLotto sales relationship, now with Tabcorp Holdings Limited (ASX: TAH) after the wagering firm recently acquired Tatts Group. This risk was lessened somewhat in 2017 when Tatts bought a 13% stake in Jumbo and signed long-term contracts out to 2022.

Hub24 Ltd (ASX: HUB) develops an investment and superannuation portfolio administration platform for individuals, corporations and self-managed super funds. Hub24 has rapidly increased funds under administration (FUA) from $100 million in 2012 to $6.6 billion as of November 2017, including 66% FUA growth in FY2017.

The company recorded its first ever full year profit for the period ending 30 June 2017, as revenue growth more than doubled that of expenses.

In an industry undergoing major change as investors increasingly turn to non-institutional platforms, Hub24 believes it can grow FUA to more than $12 billion in the next three years.

MNF Group Ltd (ASX: MNF) provides voice communications solutions for Australian retail and wholesale customers, making use of Voice Over Internet Protocol (VOIP) technology. VOIP is a much cheaper alternative to traditional telephone networks, especially for international calls, and offers superior capability and flexibility.

MNF is positioned for further growth and acquisitions and has forecast a 24% increase in NPAT for FY2018, though that figure conservatively does not include any potential new business.

Huon Aquaculture Group Ltd (ASX: HUO) expects sales volumes from its Atlantic Salmon farms in Tasmania to increase 32.5% to 24,500 tonnes in FY2018, driven by improved growing conditions and feed diet. The company was able to pay an inaugural dividend in 2017 and management expects further earnings growth for at least the next two financial years.

Huon is investing in production expansion as the company expects Australian demand for farmed salmon to continue growing at around 10% per annum. Long-term, Huon believes global salmon supply will not meet rising demand, and Huon is therefore seeking to increase export activity to Asia over the next two years.

NEW. The Motley Fool AU Releases Five Cheap and Good Stocks to Buy for 2020 and beyond!

Our experts here at The Motley Fool Australia have just released a fantastic report, detailing 5 dirt cheap shares that you can buy in 2020.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading over 40% off its high, all while offering a fully franked dividend yield over 3%...

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click here or the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.


Motley Fool contributor Ian Crane has no financial interest in any company mentioned. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. 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.