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Will these small cap stars be the blue chips of tomorrow?

When it comes to buy and hold investments a lot of investors will focus purely on blue chip companies.

Whilst there is nothing inherently wrong with this approach, I do think it is worth considering some of the smaller companies on the share market as well.

After all, if you can find a sub-$300 million company that one days becomes a large cap share, you are likely to make outsized returns on your investment.

A good example of this would be Altium Limited (ASX: ALU). Five years ago the printed circuit board design software provider’s share price was $1.06. Fast-forward to today and not only is its share price at a lofty $15.00, but it has paid out approximately $1.00 in dividends over the last five years.

That’s a total return of over 1,400%, which means a $10,000 investment would now be worth $150,000.

With that in mind, I have picked out three small cap shares which I think could be destined for a large cap future.

They are as follows:

Helloworld Ltd (ASX: HLO)

I think this travel company’s integrated service offering will continue to develop and grow over the coming years, putting it in a great position to grow its earnings at an above-average rate. In FY 2018 management expects its EBITDA to increase by upwards of 21% year-on-year as a result of the sustained strong demand for its services.

National Veterinary Care Ltd (ASX: NVL)

I’m a big fan of this veterinary company and believe it could be a great long-term buy and hold investment option due largely to its talented management team and strong earnings growth potential. I expect the company to deliver on its potential through a combination of organic growth and growth through earnings accretive acquisitions.

Zenitas Healthcare Ltd (ASX: ZNT)

Zenitas is a growing home care and health services company which listed on the ASX last year. With the National Healthcare Reform aiming to push the burden of healthcare services from hospitals into primary care, I believe it is in a great position to profit over the long term. Especially given that the highly fractured industry it operates in provides it with opportunities to accelerate its growth through acquisitions.

Finally, here are three more small cap companies that I think are destined for big things.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium, Helloworld Limited, and NATVETCARE FPO. The Motley Fool Australia has recommended Zenitas Healthcare Ltd. 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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