Small-cap ASX shares have suffered much more than their large-cap sisters over the past 18 months.
That's because, in times of economic stress, the market tends to pull money out of smaller players and into its bigger rivals that have better pricing power and economies of scale.
The lower trading volumes of small-cap stocks also make any share price movement more violent.
However, now that inflation is cooling and the prospect of a stabilisation in interest rates is tantalisingly close, small caps could make a roaring comeback.
The Elvest Fund recently named two ASX shares that have precisely that potential:
Image source: Getty Images
Stock that's climbed 48% in 2 months
Navigator Global Investments Ltd (ASX: NGI) is a stock that you don't hear much about.
Perhaps it's time you introduced yourself, because all four analysts currently surveyed on CMC Markets rate it as a buy.
Navigator Global has, to be frank, gone berserk in recent weeks. Last month it soared 9% to add to the mind-blowing 34% it gained in June.
"Alternative asset manager NGI delivered its June quarterly assets under management (AUM) update during the month, highlighting sound performance and positive net fund flows," Elvest analysts said in a memo to clients.
The big catalyst in June was the acceleration in the settlement of Navigator's buyout of the strategic portfolio from Dyal Capital.
The Elvest team noted back then that the acquisition would generate $90 to $120 million in annual free cash flow, "strong growth potential" through the relationship with Dyal, and a cleaner balance sheet.
This potential would further drive the share price upwards.
"NGI is working towards execution of its strategic portfolio transaction,… which we believe will unlock considerable value for investors in due course."
Navigator Global is now one of the five biggest holdings held by the Elvest Fund.
Down, but still fighting
While the technology sector has led the 2023 share market revival, Dicker Data Ltd (ASX: DDR) has been an exception.
The stock is now down 17.8% year to date.
The Elvest team pointed out it descended further in July despite "no company-specific news", so it doesn't alter its bullishness for the tech distributor.
"While macroeconomic concerns are perhaps weighing on the stock, our view is that Dicker Data will continue to increase its market share from 35% currently."
Dicker Data is a rare tech stock that pays out a significant income for its shareholders. The dividend yield currently stands at a fully franked 4.8%.
The business isn't resting on its laurels, either.
"With a significant expansion underway at the Kurnell headquarters, Dicker Data is primed for future technology refresh cycles across its diverse customer base."
