I'm a big fan of investing in small cap shares and believe they are a great way of generating outsized returns.
However, they are inherently riskier than their large cap peers, so investors must choose wisely when it comes to investing in them.
Luckily, brokers have been busy looking into the small cap space and have done a lot of the hard work for you.
Three small cap shares that have been rated as buys are listed below:
Accent Group Ltd (ASX: AX1)
According to a note out of Morgan Stanley, it has retained its overweight rating but trimmed the price target on this footwear-focused retailer's shares to $2.00. The broker believes that investors should take advantage of a sharp pullback in its share price which has been driven by the coronavirus outbreak. It believes the market is concerned that Accent could be impacted by lower demand and supply chain disruptions. Morgan Stanley isn't concerned by this and feels Accent is well-positioned to deliver solid earnings growth over the coming years.
Aerometrex Ltd (ASX: AMX)
A note out of Morgans reveals that it has initiated coverage on this aerial mapping company's shares with an add rating and $1.99 price target. According to the note, the broker believes the company is well-placed to grow strongly over the next five years. Especially after raising $25 million from its IPO late last year. These funds will be used to capitalise on the high level of demand for imagery and mapping services across its operating segments. At the end of February Aerometrex released its half year results and revealed a 44.3% increase in revenue over the prior corresponding period to $10.1 million.
Clover Corporation Limited (ASX: CLV)
Analysts at Ord Minnett have retained their buy rating and lifted the price target on this infant formula ingredient producer's shares to $3.47. The broker notes that Clover's share price has come under a lot of pressure over the last few weeks following the coronavirus outbreak. It appears to see this as a buying opportunity and notes that Chinese infant formula demand remains strong thanks to the online channel. It also sees opportunities for growth in the European market following regulation changes.
