Given the strong potential returns on offer at the small end of town, having a little exposure to it could potentially give a balanced portfolio a boost.
With that in mind, if your risk tolerance allows for it, you may want to get better acquainted with these highly rated small cap shares:
Adore Beauty Group Limited (ASX: ABY)
The first small cap to watch is Adore Beauty. It is Australia's leading online beauty retailer. While its near term growth may be subdued as it cycles elevated sales at the height of the pandemic, it has been tipped to resume its rapid growth soon after. Analysts at UBS are positive on its outlook. The broker currently has a buy rating and $5.60 price target on its shares.
Booktopia Group Ltd (ASX: BKG)
The second small cap ASX share to watch is Booktopia. This online book retailer has been growing at an explosive rate in FY 2021. For example, during the first half, the company reported a 51.1% increase in revenue to $112.6 million and a 502.3% jump in underlying EBITDA to $8 million. It then followed this up with a 53% increase in quarterly revenue during the third quarter. This is being driven by the shift to online shopping and its new distribution centre. Morgans is a fan of Booktopia and is expecting further market share gains. It has an add rating and $3.54 price target on its shares.
Universal Store Holdings Limited (ASX: UNI)
Another small cap to watch is Universal Store. It is a fashion retailer targeting the 16-35 year old fashion focused customer. It has been a very positive performer during the pandemic, reporting impressive growth during the first half of FY 2021 and then again during the third quarter. This appears to have positioned Universal Store for a bumper full year profit result. Morgans currently has an add rating and $8.37 price target on its shares.
