ASX shares on the smaller end of town can sometimes feel like a double-edged sword.
Their size and growth ambitions can, at times, deliver explosive returns. On the flip side, many small caps are fraught with execution risk and often struggle to turn a profit.
In an interview with Livewire, Nathan Hughes from Perpetual Limited (ASX: PPT) and Mike Murray from Australian Ethical Investment Limited (ASX: AEF) discuss small cap ASX shares with plenty of potential.
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Experts rate these 2 ASX shares
Beacon Lighting Group Ltd (ASX: BLX)
Beacon Lighting tends to fly under the radar compared to other retail ASX shares such as Adairs Ltd (ASX: ADH) and Premier Investments Limited (ASX: PMV).
Hughes is a big fan of the retail company. He thinks there's a "long runway for growth here and that will come from a few different things".
"So there's continued rollout of their existing store network. There's direct to consumer online, so they're going to new markets globally, which is really in its infancy. And they're also using their existing relationships here in the existing store network to penetrate into the trade channel.
"So using their relationships with big builders, volume builders and trying to move down the trade path away from a purely retail path," he said.
From a growth perspective, Hughes pointed out that the company has "grown revenues at about 10% per annum compound since listing (2014)."
CogState Limited (ASX: CGS)
This ASX share has exploded in recent months, rallying 140% since June to fresh all-time highs.
CogState is a neuroscience technology company focusing on scientifically validated digital brain health assessments.
Murray is excited about the company's testing for cognition and its involvement in clinical trials, typically to do with Alzheimer's disease.
"The really game-changing event is that there was a new drug that's been approved in the US for Alzheimer's and that stimulated a whole lot of new clinical trial work within Alzheimer's.
"The other thing they've done is they've licenced this technology as almost like a direct to consumer test, globally. And if you think that you might go to the doctor in the future and not just get your blood pressure tested, you might get your cognition tested for early signs of dementia or cognitive decline."
