The ASX share market is full of a wide variety of businesses that are of different sizes and operate across various industries.
Businesses with smaller market capitalisations could be compelling businesses to look at because they may have longer-term growth potential and the market hasn't priced in their long-term potential.
Fund managers from Wilson Asset Management (WAM) have picked out two businesses from the WAM Active Ltd (ASX: WAA) portfolio that could deliver good returns.
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EchoIQ Ltd (ASX: EIQ)
WAM describes Echo IQ as an Australian medical technology company focused on improving decision-making in cardiology by using artificial intelligence (AI) to detect structural heart disease from echocardiograms.
The fund manager noted that the company received US Food and Drug Administration (FDA) approval for severe aortic stenosis, with additional FDA clearance for heart failure detection expected in the near term.
WAM pointed out that the EchoIQ share price rose by 47% in March after an announcement of an expanded resale and distribution agreement with the Mayo Clinic for EchoSolv HF. The fund manager said that the agreement provides "meaningful clinical validation and materially de-risks the FDA pathway".
The investment team expects further FDA clearance for the ASX share in the coming weeks, which would significantly expand EchoIQ's US addressable market and support early revenue generation.
WAM concluded:
We believe additional hospital signings and strategic partnership discussions with multiple Australian and US-based parties remain key near-term catalysts for further share price re-ratings.
Forrestania Resources Ltd (ASX: FRS)
The other ASX share that WAM highlighted from the WAM Active portfolio was Forrestania Resources, a Perth-based mineral exploration company targeting gold, lithium, nickel, and copper deposits, primarily in Western Australia's Eastern Goldfields, Forrestania, and Southern Cross greenstone belts.
WAM noted that the Forrestania Resources share price declined in March amid a 10% decline for the gold price.
The wider mining sector saw weakness during the month amid forced liquidations and broader macroeconomic volatility, including rising Treasury yields and a stronger Australian dollar.
WAM said it still owns this ASX share in its portfolio because it views recent events as "macro-driven dislocations, rather than a deterioration" of its investment thesis.
The fund manager decided to increase its stake in the ASX share during the March sell-off.
WAM's investment team concluded its thoughts on the business with the following:
Forrestania Resources remains a compelling, undiscovered gold opportunity on the ASX, led by David Geraghty, who spent 21 years at Mineral Resources Ltd (ASX: MIN) and played a key role in its success. With minimal institutional coverage and broker sponsorship, we see potential for a share price re-rating as near-term catalysts emerge.
