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.
In order to maintain a diversified portfolio, you might want to consider teaming those small cap shares up with one of these highly rate stocks.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Serko Ltd. The Motley Fool Australia owns shares of and has recommended BIGTINCAN FPO. The Motley Fool Australia has recommended Serko Ltd and Straker Translations. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.