4 exciting small cap shares on my watchlist

Shares such as Altium Limited (ASX: ALU) and Nextdc Ltd (ASX: NXT) weren’t always billion-dollar companies.

In fact, around seven years ago both these companies would have been classed as small cap shares with market capitalisations of approximately $20 million and $195 million, respectively.

With their market capitalisations now around $2.5 billion and $2 billion, respectively, long-term shareholders have certainly been rewarded handsomely for sticking with them.

While not all small cap shares will go on to have a blue chip future, I do think there are a number on the market at the moment with significant potential.

They may not be ready to be invested in, but I certainly think they are worth of adding to your watch list. They are as follows:

Animoca Brands Corporation Ltd (ASX: AB1)

This developer and marketer of mobile games and apps for smartphones and tablets globally recently announced the launch of its Tokyo Casino Project game in the App Store and Google Play store. In many respects this game is an attempt to tap into the lucrative market that Aristocrat Leisure Limited (ASX: ALL) is profiting greatly in.

Bubs Australia Ltd (ASX: BUB)

Bubs is a promising goats milk infant formula and baby food company aiming to be the next A2 Milk Company Ltd (ASX: A2M). Investors certainly are excited about its growth prospects judging by its market capitalisation. Bubs is valued at approximately $250 million at present despite generating little by way of sales. It could live up to these lofty expectations, though, if it can win a decent share of the lucrative Chinese infant formula market.

ELMO Software Ltd (ASX: ELO)

Since listing on the ASX this cloud-based talent management software solutions provider has smashed expectations and its prospectus forecasts. This allowed ELMO to recently raise $45 million from institutional investors to accelerate its growth. I believe the strong demand it is experiencing and the large addressable market make it worth considering today.

Livetiles Ltd (ASX: LVT)

LiveTiles is a fast-growing digital workplace platform provider with its eyes on the massive artificial intelligence market. The company recently made big strides forward through the signing of AI-related deals with tech giant Microsoft and the Clean Energy Smart Manufacturing Innovation Institute.

Lastly, these up and coming mid cap stars could also have blue chip potential in my opinion.

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Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia owns shares of and has recommended ELMOSFTWRE FPO. The Motley Fool Australia owns shares of A2 Milk and Altium. 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 Scott Phillips.

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