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 chips such as Ramsay Health Care Limited (ASX: RHC) and REA Group Limited (ASX: REA) were at one stage small caps.
Anyone that bought their shares at that point, and held onto them until today, would 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 once the coronavirus pandemic passes.
The three small ASX cap shares listed below are ones that I believe have enormous potential:
Audinate Group Limited (ASX: AD8)
Audinate is a digital audio-visual networking technologies provider which has delivered very strong sales growth in recent years. This is thanks to the increasing demand for its flagship Dante product. This award-winning audio over IP networking solution is being used widely across the professional live sound, commercial installation, broadcast, and recording industries globally. Demand will inevitably soften in the short term during the pandemic, but I feel this has been more than built into its share price.
Bigtincan Holdings Ltd (ASX: BTH)
Bigtincan is a provider of enterprise mobility software that allows sales and service organisations to increase their sales win rates, reduce expenditures, and improve customer satisfaction. This is achieved through improved mobile worker productivity. Bigtincan has been growing its recurring revenues at a very strong rate thanks to its blue chip client base, which includes the likes of Nike and Sephora. It has continued to perform strongly during the pandemic and was able to reaffirm its guidance recently. That was for year on year organic revenue growth in the range of 30-40% with stable retention.
Mach7 Technologies Ltd (ASX: M7T)
A final small cap to watch is Mach7. It is a medical imaging data management solutions provider for healthcare organisations. Its solutions create a clear and complete view of the patient to inform diagnosis, reduce care delivery delays and costs, and improve patient outcomes. Demand for its offering has been growing strongly, leading to the company reporting a massive jump in half year revenue and profits. Pleasingly, management appears confident the company can build on this in the future.
