Although small cap shares are riskier than their blue chip peers, I believe a little exposure to them can be a good thing for a portfolio. Especially if you can pick out one with mid cap or even large cap potential.
Three which I think can grow materially over the next decade are listed below. Here's why they could be in the buy zone:
Baby Bunting Group Ltd (ASX: BBN)
Baby Bunting is Australia's leading baby products retailer. It became a victim of its own success in FY 2018 when the closure of a large number of competitors led to heightened clearance activities. The good news is that these clearance activities are over and Baby Bunting has experienced a significant lift in same store sales so far in FY 2019. It has also expanded its network by taking over some locations vacated by competitors. All in all, this has led to management providing EBITDA growth guidance of up to 45% this year.
Citadel Group Ltd (ASX: CGL)
Citadel Group is a software and services company which specialises in secure enterprise information management in complex environments. While Citadel does have a number of offerings, I believe the key driver of its future growth will be its Citadel-IX product. This modular SaaS platform has been designed to provide both domestic and international customers with secure, flexible options to manage their enterprise information. Given how important data security is becoming, I expect demand for Citadel-IX will continue to increase and underpin the company's earnings growth.
Kogan.com Ltd (ASX: KGN)
I think this ecommerce company could be a good option for investors given the expected increase in online shopping in Australia over the next decade. However, I wouldn't rush in and invest just yet. Instead, I would suggest investors wait for its half year results release later this month. After a slow start to FY 2019, Kogan's performance improved significantly over the holiday period. I'd like to see how its margins have fared during the half before picking up shares.
