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3 speculative shares brokers think you should take a look at

There are several small cap speculative shares we are seeing dominate the headlines lately including Afterpay Touch Group Ltd (ASX: APT)Bravura Solutions Ltd (ASX: BVS) and Xero Limited (ASX: XRO).

These speculative picks have been flying under the radar, but there are several compelling reasons why they belong on your watchlist at the very least.

Senex Energy Ltd (ASX: SXY)

With a $559 million market cap, Senex Energy Ltd is an emerging player in the oil and gas space – focused on energy sources in Australia’s Cooper, Eromanga and Surat Basins.

Senex is one of Morgans current top stock picks, with scalable gas reserves linked to east coast infrastructure giving it good “corporate appeal” according to the broker.

Morgans has an add rating on Senex right now, despite the stock dropping from its 52-week highs of 52c per share in early October to sit at 38c per share at the time of writing.

The Senex share price fell heavily off the back of its September quarter report, but those in the know are backing it, with Citi also placing a buy rating, albeit a high risk one, on the stock earlier this month with a 56c per share price target.

Senex is certainly worth a look, particularly on this downturn, but the overall oil and gas sector is volatile at present so the consensus here is to tread carefully and do your due diligence.

Megaport Ltd (ASX: MP1)

Canaccord Genuity has a hold rating on $398 million market cap connectivity and network services company Megaport Ltd with a price target of $3.80.

Megaport shares were down 1.7% to $3.31 at the time of writing.

According to the broker, Megaport’s increased investment focus was evident in its recently-reported first-quarter update, with a large increase in customers over the period, with no increase in operating costs.

Megaport has a sturdy $46.2 million cash on hand to start off the second quarter with first-quarter revenue up 19% on the fourth quarter of FY18 to $6.86 million – the highest rate of growth and compounding to 83% annual revenue growth if continuing throughout FY19.

Megaport has plans to continue its North American expansion with concerted efforts also ongoing in the Asia Pacific region.

Canaccord is taking a wait and see approach to Megaport and savvy investors will do the same.

Lycopodium Limited (ASX: LYL)

At just $173 million market cap, this engineering and project management consultancy has a long way to go before it starts getting widely recognised.

But Hartleys has a buy rating on the stock, and here’s why.

According to the broker, Lycopodium has a solid outlook ahead of it and is leveraged well to the resources cycle after achieving annual profit growth each year from listing until 2013 when profitability was impacted by a subsiding industry boom.

With resource sector conditions back on the up, Lycopodium seems poised to snap up potential contract wins over the next few years, according to Hartley’s.

Its joint venture with Monadelphous Group Limited (ASX: MND) – Mondium – also presents a likely upside, the broker says, with Mondium drawing upon Monadelphous’ construction expertise and Lycopodium’s technical expertise to target large-scale projects in the minerals processing sector.

Lycopodium shares are up 0.6% to $4.40 at the time of writing, but the broker has a $5.80 price target on it with a belief the company is well-managed and well-served by its strategy and strong client focus.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, Bravura Solutions Ltd, and Xero. 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.