While small cap shares are certainly higher up the risk scale than their blue chip counterparts, having a little exposure to them could give a portfolio a huge boost.
The key is to find companies with strong business models and equally strong growth potential.
Three which I think tick a lot of boxes right now are listed below. Here's why they could put a rocket up your portfolio:
Megaport Ltd (ASX: MP1)
Megaport is a provider of elastic interconnection services across data centres globally. This service allows its users to increase and decrease their available bandwidth in response to their own demand requirements, meaning they don't need to be tied to fixed service levels on long-term and expensive contracts and can just use what they need, when they need it. Demand for its services has been growing very strongly thanks to the ongoing migration to cloud infrastructure by enterprises. And with the migration to the cloud expected to accelerate, Megaport appears well-placed to continue growing at an above-average rate long into the future.
Serko Ltd (ASX: SKO)
Serko is an online travel booking and expense management provider that has really caught the eye in FY19. Last month, the company released its full-year results and revealed a 28% increase in total operating revenue to $23.4 million. This was driven by strong demand for its products and services from a growing customer base, which includes the likes of global tech behemoth Microsoft. Looking ahead, in FY20 Serko's management has provided total operating revenue growth guidance of between 20% and 40%.
Straker Translations Ltd (ASX: STG)
Another small cap share to consider buying is Straker Translations. This translation services platform provider uses a combination of artificial intelligence and human intelligence to provide efficient language translation services at scale. It was an impressive performer in FY19, reporting a 44% increase in revenue to NZ$24.6 million. A key driver of this growth was demand from its existing customers. Repeat revenue grew 53.3% year on year, which I feel is a sign that its customers are very happy with the service they are receiving.
