If you're interested in adding a little small cap exposure to your portfolio, then you might want to look at the shares listed below.
I believe these two ASX small cap shares have the potential to generate strong returns for investors over the next decade if everything goes to plan. Here's why they are on my watchlist:
ELMO Software Ltd (ASX: ELO)
The first small cap ASX share to watch very closely is ELMO Software. It is a cloud-based human resources and payroll software company which provides businesses with a unified platform. This clever platform streamlines a number of processes such as recruitment, on-boarding, learning, and payroll.
ELMO has been growing at a very strong rate over the last few years, but still has a significant runway for growth in an ANZ market estimated to be worth $2.4 billion a year. It also has its foot in the UK market, which is worth ~$6.8 billion a year. Another positive is the company's hefty cash balance of ~$140 million. The majority of these funds are going to be deployed for acquisitions in the near future.
MNF Group Ltd (ASX: MNF)
A second small cap ASX share to keep tabs on is MNF Group. Formerly known as MyNetFone, MNF is a leading provider of Voice over Internet Protocol (VoIP) technology. This technology is used to make telephone calls via the internet. Demand for VoIP services has been growing strongly over the last few years thanks to the NBN rollout. This growth was then given a major boost in 2020 because of the pandemic and the work from home initiative.
Looking ahead, given how many businesses appear to be seriously considering remote working as a permanent solution, MNF looks well-placed to benefit from the trend. I suspect this could make the MNF share price a market beater over the next decade.
