If your risk profile allows it, I think having a little exposure to the small cap side of the market can be a good thing for a portfolio.
Especially if you're able to spot the next Altium Limited (ASX: ALU) or Nearmap Ltd (ASX: NEA).
Over the last few years these two companies have gone from being small cap shares flying under the radar to $4.5 billion and $1.2 billion tech stars, respectively, that are featured in countless portfolios across the country.
Furthermore, their rapid rises have rewarded long term shareholders handsomely with some mouth-watering returns.
But that was then and this is now, so which shares are the next Altium and Nearmap? Three small caps which I think have significant potential are listed below. Here's why I would watch them closely:
Bigtincan Holdings Ltd (ASX: BTH)
I think this fast-growing provider of enterprise mobility software could be worth keeping a very close eye on. Bigtincan's software allows sales and service organisations to increase their sales win rates, reduce expenditures, and improve customer satisfaction through improved mobile worker productivity. It has a good number of blue chip clients using its software including U.S. telco giant AT&T, biotechnology company Thermo Fisher, pharmaceutical company Merck, and big four bank Australia and New Zealand Banking Group (ASX: ANZ). And this month they were joined by sports giant Nike, which signed a three-year deal with the company.
Straker Translations Ltd (ASX: STG)
Another small cap to watch is Straker Translations. It is a New Zealand-based translation services platform provider that uses a combination of artificial intelligence and human intelligence to provide language translation services at scale. It was a strong performer in FY 2019 thanks to its growing recurring revenues and strong demand for new customers. This led to Straker reporting a 44% increase in revenue to NZ$24.6 million. Management estimates that it global market opportunity will be US$66 billion per annum by 2022.
Volpara Health Technologies Ltd (ASX: VHT)
A final small cap to watch is Volpara. It provides software that uses artificial intelligence imaging algorithms to assist with the early detection of breast cancer. The software has been growing in popularity with radiologists in North America over the last few years, leading to the company reporting explosive annual recurring revenue growth. Thanks to the quality and importance of the software, recent acquisitions, and its expanding footprint, I believe the company is well-placed to deliver further strong growth in its key metrics in FY 2020 and beyond.
