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Why these 3 small cap underachievers could outrun the S&P/ASX 200 in FY19

A number of ASX sinners at the smaller end of the market may be finding redemption with investors as these underperformers appear to have turned a corner.

These stocks could be primed to outperform the market given that they have lagged the market for most of 2018, if not longer.

The Navitas Limited (ASX: NVT) share price is one of the rare few bucking the market downtrend today after management posted a trading update.

The Navitas share price jumped 1% to $5.16 in after lunch trade when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is down 1.2%.

The educational services provider has a lot to prove since it spurred a takeover approach in October and management didn’t disappoint when it reported that student enrollments across its University Partnership Division jumped 5% to 17,013 in the third semester.

Today’s news pushes the NVT share price to an 18% gain over the past six months when the top 200 ASX stocks have fallen 6%.

The takeover approach by BGH Consortium, led by Navitas director Rodney Jones, marked a turning point for the company as its share price was a big laggard up to that point.

If Navitas can continue to deliver enrolment growth, it will justify management’s decision to reject the takeover bid, which had an indicative price of $5.50 a share.

Navitas isn’t the only small cap underachiever that’s winning back investors. Childcare centre operator G8 Education Ltd (ASX: GEM) is another lost dog that’s winning new fans after the company indicated that the multiple headwinds buffeting the industry is easing.

Households are getting used to the change in government childcare rebates while the oversupply of childcare places seem to be easing.

The G8 share price also managed to break into the black today as it traded up 0.5% at $3.02 at the time of writing and I think it’s set to go higher over the next few months.

The third is Baby Bunting Group Ltd (ASX: BBN) which seem to have turned a corner in August when it gave an upbeat outlook following a painful FY18 for shareholders due to competitive pressure.

But the collapse of a few of its rivals, particularly Toys ‘R’ Us, has turned the tables for the baby products retailer.

The Baby Bunting share price eased 0.4% in afternoon trade to $2.37 but its up 60% over the past six months and I think it will be heading towards the $2.80 to $3 mark over the coming months.

Motley Fool contributor Brendon Lau owns shares of Baby Bunting. The Motley Fool Australia has no position in any of the stocks mentioned. 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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