While small cap shares are high up on the risk scale, there's no doubt the potential returns on offer make them a tempting option.
In light of this, I think a little exposure to the small cap side of the market can be a good thing for a diversified portfolio. The key, though, is investing in the future stars and avoiding the duds.
Three top small cap shares that I think have the potential to be future stars are listed below. Here's why I like them:
Bigtincan Holdings Ltd (ASX: BTH)
Bigtincan is a provider of enterprise mobility software. This software allows businesses to increase their sales win rates, reduce expenditures, and improve customer satisfaction through improved mobile worker productivity. I feel a testament to the quality of its software is its blue chip client base. Bigtincan counts the likes of sports giant Nike and pharmaceutical company Merck as customers.
Serko Ltd (ASX: SKO)
Serko is an online travel booking and expense management provider. It has been growing at a very strong rate over the last couple of years and look well-positioned to continue doing so thanks to strong demand and its growing recurring revenues. Another positive is that the company recently raised funds to fuel its growth. A cornerstone investor in this capital raising was travel giant Booking.com. As part of the deal, the two companies announced an extended partnership which looks set to give Serko's sales a boost in 2020.
Straker Translations Ltd (ASX: STG)
Straker Translations is a translation services platform provider. It uses a combination of artificial intelligence and human intelligence to provide highly efficient language translation services. I think it is worth watching very closely, especially given its strong sales growth and massive global market opportunity. In FY 2019 it reported a 44% increase in revenue to NZ$24.6 million. It then followed this up with a 38% lift in first quarter cash receipts. I expect similarly strong growth over the remainder of FY 2020.
