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Why these small cap shares could be market-beaters in FY 2019

Small cap shares continued their outperformance in the last financial year with the Small Ordinaries (Index: ^AXSO) (ASX: XSO) pushing almost 25% higher compared to the 8.3% gain made by its illustrious rival the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

I think this return demonstrates why having a little exposure to the small cap space can be a good thing for a portfolio.

In light of this, I have picked out three small cap shares which I think could beat the market in the new financial year. They are as follows:

Bravura Solutions Ltd (ASX: BVS)

Bravura is a fast-growing fintech company which provides software solutions for the wealth management, life insurance, and funds administration industries. Its key product offering is the Sonata web-enabled administration solution which has been growing in popularity over the last 12 months. So much so, Sonata has become the biggest contributor to the company’s total revenue. Due to the quality of the platform and its sizeable market opportunity, I think Sonata makes Bravura a company with a bright future ahead of it.

Money3 Corporation Limited (ASX: MNY)

After successfully transitioning away from the controversial payday loans market to secured auto loans, I think this financial services company could be a great investment even after its sizeable gain over the last 12 months. Especially considering how profitable it has found the auto loans business to be despite how small its current share of the market is. Another bonus is that Money3’s shares offer a trailing fully franked 3.9% dividend.

Supply Network Limited (ASX: SNL)

Supply Network is an after-market parts supplier to the commercial vehicle industry. Last month the company revealed that business conditions have remained positive in the second-half, leading to management upgrading its full-year earnings guidance. Instead of earnings before interest and tax (EBIT) of approximately $10.8 million, its guidance has been lifted to EBIT of $11.5 million. This will be an increase of around 19% year-on-year which I think makes its shares attractive value at around 20x estimated full-year earnings.

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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 and has recommended Supply Network Limited. The Motley Fool Australia owns shares of Bravura Solutions 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 Scott Phillips.

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