Those investors with small-cap ASX shares in their portfolio have suffered greatly over the past couple of years.
Since inflation rocketed, interest rates followed, and Russia stamped into Ukraine, money was pulled out from smaller players into their larger rivals.
This is due to the perception that big companies are better placed to cope with economic uncertainty, due to their pricing power and scale.
However, last month green shoots started to appear in small-cap land, according to Cyan portfolio manager Dean Fergie.
"After a very challenging investment period at the smaller end of the Australian market, July offered some real signs that confidence is finally beginning to emerge," he said in a memo to clients.
Inflation seems to be on the way down, and central banks look like they might put their guns away.
"Further, with the conclusion of June's tax-loss selling period, there has been a noticeable uptick in the confidence of small company investors, contributing to an atmosphere of growing optimism."
So which are the ASX shares that Fergie's team has the most conviction in?
Here are two:
CAGR of 69%? Yes, please
Video game developer Playside Studios Ltd (ASX: PLY) has had a wild ride since listing on the ASX in December 2020.
After starting its listed life in the mid-20 cents, it initially defied the tech sell-off at the end of 2021 to sit proudly at $1.19 in February last year.
Then the market lost faith, sending the Playside share price to as low as 28 cents earlier this year.
But with a massive 46% rise in July, Fergie reckons it's ready to turn it around.
"Playside proved it is more than a work-for-hire game developer with a solid rebound in its quarterly cash flow statement, with strong performances from both its original IP and work-for-hire divisions."
The Melbourne company announced revenue guidance of more than $50 million for the current financial year.
"[This] was ~20% higher than previous expectations of analysts," he said.
"It is worth remembering that this represents organic growth from $10 million to a forecast $50 million+ in 3 years, equating to a compound annual growth rate of 69%."
Fergie's fund has been invested in Playside for years, but is more bullish than ever right now.
"We would also argue that the quality of revenue has improved, given Playside now partners with some of the best of breed industry leaders."
The start of 'significant price momentum'
Hospital software maker Alcidion Group Ltd (ASX: ALC) has been one of the most frustrating holdings for Fergie's portfolio.
Despite winning clients, the stock price has been pummelled 74% down since June 2021.
The latest performance figures, however, convince him that a turnaround is imminent.
"Alcidion rebounded well with a strong June quarter, from both a cash flow and revenue perspective."
Indeed, the market sent the share price soaring 32% over the last month.
"We expect this is the beginning of significant price momentum as the company executes on its strong pipeline of potential projects, particularly in the UK," said Fergie.
"We believe Alicidion will be a strong performer over the next 12 months as the government-led push to digitisation of the UK healthcare sector accelerates."
The Cyan team is not the only one keen on Alcidion.
According to CMC Markets, all three of Bell Potter, Canaccord and RBC Capital Markets currently rate the stock as a strong buy.
