The Motley Fool

3 quality small cap ASX shares to watch

I think a little exposure to the small side of the market can be a good thing for a portfolio.

This is because even blue chip companies such as Ramsay Health Care Limited (ASX: RHC) were small caps at one stage.

Anyone that bought Ramsay’s shares at that point and held onto them until today will have generated incredible returns.

And while not all small cap shares will live up to their potential, there are a few that I feel have a good chance of doing so.

Three small ASX cap shares worth watching very closely are as follows:

Audinate Group Limited (ASX: AD8)

Audinate is a digital audio-visual networking technologies provider. The key product in its portfolio is the increasingly popular Dante solution. This award-winning audio over IP networking solution is being used widely across the professional live sound, commercial installation, broadcast, and recording industries globally. It distributes digital audio and video signals over computer networks rather than through traditional analogue cables. This is a much more efficient way of doing things and has proven very popular with end users and has led to explosive sales growth.

ELMO Software Ltd (ASX: ELO)

ELMO Software is a fast-growing cloud-based human resources and payroll software company. It provides a unified platform that allows users to streamline processes for employee administration, recruitment, on-boarding, learning, performance, remuneration, compliance training and payroll. It has been a strong performer over the last couple of years and I remain confident it is well-placed to continue this positive form in FY 2020 and beyond. At the end of the first half its annualised recurring revenue (ARR) reached $52 million, which was up 42.8% on the prior corresponding period.

Serko Ltd (ASX: SKO)

Serko is the online travel booking and expense management provider behind the Zeno Travel and Zeno Expense platforms. Zeno Travel provides AI-powered end-to-end travel itineraries, cost control and travel policy compliance to corporate customers. Whereas the Zeno Expense platform allows users to automate and streamline the expense administration function, identify out-of-policy expense claims, and prevent fraud. Serko has been experiencing strong demand for its products in recent years, leading to stellar recurring revenue growth. I feel confident there will be more of the same in FY 2020 and beyond.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

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 and recommends Elmo Software. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AUDINATEGL FPO and Serko Ltd. The Motley Fool Australia has recommended AUDINATEGL FPO, Elmo Software, Ramsay Health Care Limited, and Serko Ltd. 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.

Related Articles...

Latest posts by James Mickleboro (see all)