I'm a big fan of investing in small cap shares and believe they are a great way of generating outsized returns.
However, they are inherently riskier than their large cap peers, so investors must choose wisely when it comes to investing in them.
Luckily, brokers have been busy looking into the small cap space and have done a lot of the hard work for you.
Three small cap shares that have been rated as buys are listed below:
LiveHire Ltd (ASX: LVH)
According to a note out of Morgans, its analysts have an add rating and 85 cents price target on this talent technology company's shares. After a disappointing FY 2018, Morgans appears optimistic that LiveHire's refocused sales strategy could lead to strong returns for shareholders in the future. Especially after the release of a solid half year result last month which was driven by higher average yields from new enterprise customers. I think LiveHire is an interesting company, but it's a little soon for an investment in my opinion.
Megaport Ltd (ASX: MP1)
A note out of Goldman Sachs reveals that its analysts have retained their buy rating and $4.75 price target on Megaport's shares after the quarterly results of data centre operators Equinix and Digital Realty pointed to increasing demand for its offering. Goldman believes the trends from these results are supportive of its buy thesis and notes that the migration to cloud-based infrastructure by corporates globally is continuing to drive demand for a broad range of connectivity solutions. As Megaport provides an on-demand virtual connectivity solution for corporates, the broker expects demand to increase as more workloads migrate to the cloud and require a broader range of counter-parties to connect with. It is a high risk option but I agree that it has significant potential.
Redbubble Ltd (ASX: RBL)
Another note out of Goldman Sachs reveals that its analysts have a buy rating and $1.30 price target on this ecommerce company's shares. According to the note, the broker has concerns that Google algorithm changes could impact its second half performance, but remains positive on the company's medium to long term growth drivers. Goldman expects Redbubble to benefit from improving network effects, new product launches, its partnership program, the ongoing penetration of new geographies, and an improvement in member experience driving recurring engagement. I like Redbubble as well and think it could be worth considering as a patient long-term investment.
