I'm a big fan of small cap shares and believe it is well worth having a little exposure to that side of the market if your risk profile allows it.
This is because the potential returns on offer from small cap shares are vastly superior to those on offer from blue chip shares.
One negative, though, is that small cap shares are certainly more risky that their blue chip equivalents. This means investors have to choose very carefully when investing in the space.
The good news is that brokers have done a lot of the hard work for you and picked out some to consider. Here are three small cap shares they have rated as buys:
LiveTiles Ltd (ASX: LVT)
According to a note out of Citi, it has retained its buy rating and 91 cents price target on this software company's shares after its recent update. Although LiveTiles appears to have fallen a touch short of the broker's expectations in the second quarter, its analysts remain positive on its long-term prospects. Citi expects LiveTiles to achieve $100 million in annualised recurring revenues (ARR) by the second quarter of FY 2021. This compares to an ARR of $22.9 million at the end of December.
Praemium Ltd (ASX: PPS)
Analysts at Morgans have retained their add rating but cut the price target on this investment platform provider's shares to 87 cents following its recent quarterly update. During the December quarter the company reported quarterly gross inflows of $768 million, which is the highest on record. However, due largely to market volatility the company actually ended up posting a decline in funds under administration to $8.4 billion from $8.6 billion. That hasn't put Morgans off the company, though. It believes the strength of its underlying business will help it deliver strong earnings growth in the coming years.
Redbubble Ltd (ASX: RBL)
A note out of Goldman Sachs reveals that its analysts have retained their buy rating on this ecommerce company's shares, albeit with a reduced price target of $1.55. The broker lowered its price target after reviewing Google Trends data. It believes the data suggests that the recovery from the Google algorithm changes is taking longer than previously expected. However, it still sees Redbubble as a great long term investment due to its positive medium to long term growth outlook. Goldman expects Redbubble to benefit from network effects, new product launches, its partnership program, and the penetration of new geographies.
