The ASX is home to thousands of potential investments, though the biggest companies get the most attention. The smaller ASX shares could actually be some of the most compelling investments to own right now.
It's quite easy to underestimate how much of a difference compounding can make to a company's financial progress and what that can do for shareholders.
Fund managers from the listed investment company (LIC) WAM Active Ltd (ASX: WAA) have revealed two compelling ideas. WAM Active looks for mispriced opportunities in the Australian market.
Impressively, the WAM Active portfolio has returned an average of 14.4% per year since inception in January 2008, before fees, expenses and taxes. That shows the investment team are adept at picking ideas. Let's look at the two names that WAM highlighted.
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Solstice Minerals Ltd (ASX: SLS)
WAM described Solstice Minerals as a copper-gold exploration company advancing its Nanadie Project in Western Australia.
Last month, the company released updated drilling results from its first diamond drilling program. This confirmed the mineralised system extends to a depth of more than 600 metres and remains open at depth.
The fund manager also noted the ASX share's drilling showed mineralisation continues well below the existing resource, which highlights the potential for the deposit to grow.
WAM said these results build on earlier drilling and continue to demonstrate the scale and continuity of the system.
The investment team concluded that the project currently hosts a 40.4 million tonnes mineral resource estimate and WAM believes the latest results highlight the potential for the resource to grow as drilling continues.
Southern Cross Electrical Engineer Ltd (ASX: SXE)
The other ASX share that WAM highlighted in the WAM Active portfolio was Southern Cross Electrical Engineering, a national provider of electrical, instrumentation and communications services. It also has growing exposure to data centres, infrastructure and electrification projects.
The fund manager noted that, last month, the company upgraded its earnings guidance and strengthened its balance sheet with a capital raising to support further growth.
WAM also said that the ASX share secured more than $150 million of new projects, including work linked to data centre construction.
With that update, Southern Cross Electrical Engineering upgraded its guidance for FY26 underlying operating profit (EBITDA) to at least $75 million, while introducing FY27 EBITDA guidance of at least $100 million.
WAM concluded:
We believe the company is well positioned to continue growing earnings, supported by demand for data centre capacity and broader electrification trends, with the strengthened balance sheet providing flexibility to pursue further growth opportunities.
