Although small cap shares carry a lot of risks, I think if your risk profile allows it, they can be a great addition to a balanced portfolio.
After all, you only need to look at the performance of the Small Ordinaries (Index: ^AXSO) (ASX: XSO) over the last three years to see this.
During this time the Small Ordinaries has gained 23%, compared to a 12% gain by the All Ordinaries.
With that in mind, here are three small cap shares I think could be worth looking closer at:
Audinate Group Limited (ASX: AD8)
Audinate is a digital audio company that develops hardware and software solutions for the professional audio-visual industry. The company was a strong performer in FY 2018, growing full year revenue by 30% to $19.7 million. Pleasingly, this strong form has continued in FY 2019 with a record first quarter result. Last week management advised of first quarter cash collections of $6.8 million, up 51% on the prior corresponding period. This was driven by solid core chips, cards and modules sales, along with strong demand for AVIO adapters.
Paragon Care Ltd (ASX: PGC)
Another small cap share worth considering is this integrated services provider to the healthcare and aged care markets. As well as operating in two markets that are expected to grow strongly over the coming years, Paragon Care has opportunities to accelerate its growth through acquisitions after a recent $45.2 million placement. This should put it in a position to continue growing its dividend, which currently provides a trailing fully franked 4.5% yield.
Serko Ltd (ASX: SKO)
This New Zealand-based travel and expense technology solutions provider is a recent listing on the Australian share market. I've been impressed with what I've seen since its listing and believe it could be worth a look. Serko's services are used by a growing number of companies in the travel industry including travel agent giant Flight Centre Travel Group (ASX: FLT). This year the company is expecting to deliver revenue growth of up to 30%.
