If your risk profile allows it, I think having a little exposure to small cap shares can be a great thing for a portfolio.
After all, over the last three years the Small Ordinaries index has outperformed its illustrious bigger brother, the All Ordinaries, by some distance.
During this time the Small Ordinaries has pushed 30% higher compared to the All Ordinaries’ 12.7% gain.
Four small cap shares that I think are well worth looking closely at this month are listed below. Here’s why I like them:
Citadel Group Ltd (ASX: CGL)
Citadel is a software and services company specialising in IT security and data management. It delivered record revenues of $108.5 million and a 26% increase in net profit after tax to $19.4 million in FY 2018. This was driven partly by the growing popularity of its Citadel-IX cloud-based enterprise information management platform.
Megaport Ltd (ASX: MP1)
Megaport is a provider of elasticity connectivity and network services in data centres. The growing demand for its offering led to the company posting an 85% increase in revenue to $19.8 million in FY 2018. During the year the company grew its customer number by 41% to 1,038. These customers include companies such as Aon, Flight Centre Travel Group Ltd (ASX: FLT), and Vodafone.
Money3 Corporation Limited (ASX: MNY)
Money3 is a financial services company that specialises in secured auto loans. In FY 2018 the company posted a 16.6% increase in its secured auto loan book, leading to a 10.1% increase in net profit after tax to $32 million. Considering the company only has a very small share of the secured auto loan market, I believe it has a significant runway for growth ahead of it.
Noni B Limited (ASX: NBL)
I think Noni B is a great option in the retail sector for small cap investors. It had a strong FY 2018 and aims to build on this in FY 2019 with the acquisition of a number of brands from Specialty Fashion Group Ltd (ASX: SFH). Management appears confident that these brands will be a big boost to its earnings growth in the coming years.
We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited. The Motley Fool Australia owns shares of Citadel Group 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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