2 small-cap ASX shares pushing through lockdown pain

There are gems to be found outside the usual ASX names that you always hear. Here are 2 that the Wilson Asset Management team favour.

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During a COVID-ravaged 2021 financial year, Wilson Asset Management portfolio managers reckon the secret to buying ASX shares was picking the stayers.

"Investing in companies that could push through temporary pain to drive top-line growth was key for the WAM Microcap Ltd (ASX: WMI) team," said Oscar Oberg, Catriona Burns and Matthew Haupt in a memo to clients.

"While the equity market has rallied significantly since the lows of mid-2020, we continue to focus on companies we believe will benefit from a reopening of borders and lockdowns lifting in the medium to long term."

The WAM Microcap shares themselves have gained more than 32% in the past 12 months, affirming this investment strategy. 

The other secret is to remember there are more than 2,000 companies listed on the ASX. 

This means there are plenty outside the usual large-cap suspects that don't receive much publicity.

According to the Wilson trio, a cornucopia of initial public offerings meant that they found plenty of those gems.

"Many companies were overlooked or under-researched by investors, creating mispricing opportunities," said the fund managers.

"These conditions were favourable for our investment process of finding undervalued growth companies with strong fundamentals and a catalyst for a share price re-rating."

Oberg, Burns and Haupt named 2 ASX shares that WAM Microcap holds that fit the bill:

Plenty of hairy legs after lockdown

Hair removal salon network Silk Laser Australia Ltd (ASX: SLA) only listed on the ASX in December. The Wilson team was impressed with its first full year result.

"Silk Laser Australia beat its FY2021 forecast and upgraded its guidance," the memo read.

"The company recorded year-on-year revenue growth of 82% and a 129% increase in online sales as digital expansion drove sales growth."

In June, Silk Laser raised $20 million via new shares to acquire businesses both in Australia and New Zealand to grow its network.

"The deal is set to close in September and we expect it will give Silk Laser Australia a stronger market share on the Australian east coast market with a scaled entry into Victoria and New Zealand."

Silk Laser shares are up more than 8.3% this year, although its current price of $3.90 is well down on its high of $5.30.

ASX shares for the 'global video boom'

Video hardware and software maker Atomos Ltd (ASX: AMS) is seeing "rapid adoption" of its ProRes RAW video compression protocol.

"Atomos announced record revenue of $78.6 million for FY2021," said the Wilson portfolio managers.

"The company also launched several new products during the financial year, including hardware devices and software applications which supported the company's revenue growth."

The Wilson team were not the only ones to like what they saw. Atomos shares have rocketed almost 34% since the results a fortnight ago.

Oberg, Burns and Haupt reckon the pandemic has triggered "a global video boom".

"We remain positive on Atomos as the company continues to find a solid market base for growth, with new products and services already in the making."

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Atomos Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended SILK Laser Australia Limited. The Motley Fool Australia has recommended Atomos Ltd and SILK Laser Australia Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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