Higher-risk shares are not for everyone. They can be volatile, sentiment can swing quickly, and short-term results do not always reflect long-term potential. But for investors willing to accept uncertainty, they can also offer outsized rewards if the underlying business executes.
If I were looking to add a small allocation to higher-risk, higher-reward opportunities heading into February, these are three ASX stocks I would be seriously considering.
Catapult Sports Ltd (ASX: CAT)
Catapult is a leading provider of wearable technology and software platforms that are now embedded across many of the world's top sports teams. This includes Manchester United, Kansas City Chiefs, Cricket Australia, and Golden State Warriors.
The higher-risk element comes from valuation sensitivity and reliance on continued subscription growth. The reward lies in Catapult's operating leverage. As revenue grows, margins have the potential to expand meaningfully, particularly as the company shifts further toward software-led earnings.
If Catapult continues to execute on cost discipline while growing its installed base, I think even modest beats on expectations could have an outsized impact on its share price.
DroneShield Ltd (ASX: DRO)
DroneShield is firmly in the high-risk, high-reward category. Its technology addresses counter-drone detection and defence, a market that has expanded rapidly due to rising geopolitical tensions and the increasing use of unmanned systems.
Revenue visibility can be lumpy, driven by contract timing and government procurement cycles. That uncertainty makes the stock volatile. However, the addressable market continues to grow, and DroneShield's technology is already deployed across multiple defence and security agencies globally.
If order flow continues to scale and convert into repeat customers, I believe the upside could be substantial relative to the company's size.
Nanosonics Ltd (ASX: NAN)
Nanosonics is a different type of higher-risk opportunity. It already has a proven core product in trophon, but the investment case now hinges on successful innovation and commercial execution.
The FDA clearance of trophon3 and the trophon2 Plus upgrade created a meaningful upgrade cycle opportunity across tens of thousands of existing devices globally. Faster cycle times, deeper digital integration, and expanded traceability improve the value proposition for hospitals and clinics, while supporting higher software-driven revenue over time.
More importantly, the De Novo clearance for the CORIS system opens an entirely new market in flexible endoscope reprocessing. This represents a step beyond ultrasound disinfection and, if successfully commercialised, I think it could significantly expand Nanosonics' long-term revenue base. The phased rollout approach highlights the execution risk, but also reflects a disciplined strategy.
If CORIS gains traction through FY26 and beyond, I believe the long-term payoff could be material.
Foolish Takeaway
These are not low-risk, set-and-forget investments. Each comes with execution risk, valuation sensitivity, and the potential for short-term disappointment.
But for investors prepared to tolerate volatility and take a long-term view, I think Catapult, DroneShield, and Nanosonics each offer credible pathways to meaningful upside if their respective strategies play out.
