In FY 2018 the Small Ordinaries provided investors with an impressive return of 20.5%.
I believe this return demonstrates why having a little exposure to the small cap space can be a good thing for a portfolio.
With this in mind, three small cap shares that I think investors ought to consider buying are listed below:
Capilano Honey Ltd (ASX: CZZ)
As its name implies, Capilano Honey is one of Australia’s leading honey producers. While the company has carved out a strong share of the local market, its expansion into China is the main attraction for me. It isn’t going to be easy, though, and progress has been slower than expected, but if it can crack the China market then it could provide Capilano Honey with a significant runway for growth. This would put the company in a position to grow its earnings and dividend at a solid rate for the foreseeable future. At present Capilano Honey’s shares provide a trailing fully franked 2.6% dividend.
Collection House Limited (ASX: CLH)
I think that this receivable management company could be worth a look after returning to form following a difficult couple of years. Improvements in collection efficiencies, technology adoption, and data analysis have led to Collection House enjoying higher returns on investments and more profitable operations. I think this could put it in a position to grow earnings and its dividend at a strong rate over the coming years. Its shares offer a trailing fully franked 5% dividend.
Experience Co Ltd (ASX: EXP)
There are few shares on the Australian share market that I think are better positioned to benefit from the Australian tourism boom than Experience Co. Thanks to a series of acquisitions Experience Co has moved away from being just a skydiving business to a business offering everything an adrenaline junky could wish for. It has had a tough FY 2018 due to a once in a generation weather event, but I expect it will bounce back strongly in FY 2019. So with its shares notably lower since this time last year, now could be an opportune time to invest with a long-term view.
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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 Capilano Honey Limited and EXPERNCECO FPO. 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.