An average investment portfolio put together by an individual investor should contain a good mix of blue chip, income, and growth shares. Generally more defensive, blue-chip shares like Commonwealth Bank of Australia (ASX: CBA) should make up a larger part of a new investor’s portfolio.
For new and more experienced investors there’s also room to include some small-cap growth shares. As these can deliver the biggest returns over the medium term to investors.
For example it’s possible for a small-cap share to double or even triple in price over just a couple of years. If you’re lucky.
Remember small cap shares can also lose half their value or more in just a trading session or two, so you should be aware of the considerable risk at this end of the market.
Below are three small-cap shares that investors should know about.
PWR Holdings Ltd (ASX: PWH) is a provider of cooling solutions and other engine technology to cars across the professional motor racing industry globally. Including the F1, NASCAR and V8 Supercar competitions.
In FY 2018 it recorded a net profit of $11 million on revenue of $51.9 million, with earnings per share of 11 cents. The stock is up 43% over the past year and has been on a steady upward trajectory since its 2016 initial public offering.
Superloop Ltd (ASX: SLC) is a dark-fibre business in that it provides high speed internet connections and cloud services (online data storage) to corporate businesses across Australia, Singapore and Hong Kong. In that sense it is similar to a smaller version of TPG Telecom Ltd (ASX: TPM) or Vocus Group Ltd (ASX: VOC). In fact the founder of Superloop, Bevan Slattery, sold a dark fibre business in Pipe Networks to TPG back in 2010 for around $400 million.
Superloop shares are down 33% over the past year, despite some reasonable operational progress.
Serko Ltd (ASX: SKO) is a New Zealand-based under-the-radar software business that is growing quickly in serving travel agents with software that helps improve productivity and cut costs. It’s forecasting revenue growth around 20%-30% in FY 2019 and an operating profit around NZ$2.2 million as it invests to grow. The shares are up nearly 10% over the past year.
For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..
But knowing which blue chips to buy, and when, can be fraught with danger.
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Motley Fool contributor Yulia Mosaleva owns shares of Commonwealth Bank of Australia and TPG Telecom Limited. The Motley Fool Australia has recommended TPG Telecom Limited and Vocus Communications Limited. 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.