There are a number of things that the investors at Naos look for when deciding on a potential opportunity.

It's looking for businesses that are good value with long-term growth potential.

The portfolio is about finding quality over quantity. Naos' strategy is to invest for the long-term, it isn't a short-term trader. It doesn't mind holding fairly illiquid ASX shares as long as they can generate good performance.

Naos ignores the index – it invests in whichever investments that look promising. The fund manager provides pure exposure to 'industrial' businesses, though this is a wide category. It invests with an ESG overlay. That means investments need to be satisfactory when it comes to environmental, social and governance factors.

Every month the listed investment company (LIC) NAOS Ex-50 Opportunities Company Ltd (ASX: NAC) releases an update about how its portfolio is going and some thoughts on some of the ASX growth shares.

Here are two that featured this month:

Step One Clothing Ltd (ASX: STP)

Step One describes itself as a leading direct-to-consumer pure online retailer for men's underwear. That underwear is a range of high quality, organically grown and certified, and ethically produced products.

The Step One product is one that the Naos team have been using because they believe it's best of breed. It's one of the few on the ASX that Naos could say that about. Naos has been analysing the business in detail since it listed half a year ago.

Naos noted that within the last five years, Step One has gone from essentially $0 in revenue to potentially around $75 million in annual sales of men's underwear, mainly in Austrlaia and the UK.

The ASX growth share's initial public offering (IPO) price was $1.53 and Naos bought some shares at $2.25 in early December.

However, a business update in December said that revenue growth would be 1% to 5% higher than the prospectus forecast of 19.9% for FY22. After that update, the shares fell back to the IPO price.

Naos suggested the heavy share price reaction showed the update was well below the markets' "very bullish expectations" with some shareholders perhaps selling until they see more evidence of consistent growth again.

The fund manager added to its Step One investment after the trading update. Regarding the bull case, Naos said that the business can continue to grow at a reasonable rate over the coming years thanks to geographic and product expansion.

Urbanise.com Ltd (ASX: UBN)

This ASX growth share is another that has seen its share price fall. Over the last month, it's down by more than 20%.

Naos explained that Urbanise.com fell sharply after what some considered to be an abrupt exit of the CEO and the search for a replacement.

The fund manager believes that what has most likely unnerved the market is the risk that the company doesn't convert on its immediate sales pipeline and subsequently requires a capital raising. Naos doesn't think it would be a major issue if that happened.

The reason for that confidence is the assumption that growth rates (especially in the strata division) continue to be at least 20% per annum.

Naos thinks that company needs to focus on its strengths and uses a strategy that produce tangible results.

It is the fund manager's view that Urbanise.com has a dominant position within the strata space and must focus on achieving a market share of more than 65% of a market that has recurring revenue of around $40 million per annum in the shortest time possible.

The current valuation of annual recurring revenue (ARR) to the market capitalisation of "just" five times suggests to Naos that there is little faith from the market that the company can grow in the medium-term.

But, in the fund manager's opinion, if the company can demonstrate it can grow at around 20% per annum then the multiples applied to a business to business (B2B) enterprise software as a service (SaaS) business is likely to be significantly higher.

The post 2 unloved ASX growth shares that have good potential: expert appeared first on The Motley Fool Australia.

During the day, however, the company's shares have backtracked after some profit-taking by investors. At the close of trade, the cloud-based software solutions company's shares swapped hands for 8.6 cents, up 6.17%.

A quick take on Urbanise

Established in 2001, Urbanise leverages cloud technology and the Internet of Things (IoT) to manage infrastructure, buildings, housing estates and local government structures.

It enables building operators to streamline workflow processes as they manage properties. The various functions include community and property management, asset maintenance, mobile workforce, asset monitoring, utility reporting, and more.

Milestone win

Investors are boosting the Urbanise share price today after the company revealed a milestone customer win.

In today's release, Urbanise advised it has secured a 3-year contract with leading Dubai-based property developer, Nakheel.

The deal will see Urbanise deliver to Nakheel a fully integrated facilities management and strata solution platform.

Urbanise's end-to-end product will provide the developer with the ability to manage several properties across its extensive portfolio. This includes customers in the residential developments, hotels and resorts, malls and corporate office premises space.

Urbanise expects the contract to generate roughly $760,000 in annual recurring revenue (ARR).

Management said this would be reflected "across both the facilities management and strata divisions and will form part of the backlog until go-live".

Furthermore, the company will move both systems (facilities and strata management software) into a single integrated solution.

About the Urbanise share price

The Urbanise share price has gained more than 110% in the past 12 months and is up around 13% year-to-date. The company's shares reached a multi-year high of 12 cents in late September before stabilising thereafter.

Urbanise commands a market capitalisation of just over $70 million at the current share price, with 834.3 million shares on issue.

The post Why the Urbanise (ASX:UBN) share price reached as high as 17% today appeared first on The Motley Fool Australia.

The share price crashed due to the company owning up to a "sales backlog" of devices which have been contracted but not installed as revenues rose just 10% over the prior corresponding half in a result not expected from a supposedly fast-growing tech stock.

The company also signed just 13 new customers over the course of the half, compared to six in the prior corresponding half, with the group's chief executive stating that its sales pipeline is increasing in size as the business continues to invest in customer acquisition.

The company recently raised $6.5 million to support growth and as at 24 February 2016 had $13.1 million in cash on its balance sheet, with no debt and a market cap around $150 million.

However, the disappointing growth and ballooning costs over the period are reflected in today's big share price falls and I would not be surprised to see the shares come under more heavy selling pressure this week.

Other preferable looking options in the software-as-a-service space include genuinely fast-growing payment processing business Touchcorp Ltd (ASX: TCH), or online education provider 3P Learning Ltd (ASX: 3PL).

The post Why the Urbanise.Com Ltd share price crashed 28% today appeared first on The Motley Fool Australia.

The two essential ingredients in creating fast-growing digital businesses are skilled workers and investor capital, with many of the policy initiatives aimed at promoting education and encouraging investment via tax incentives. A total of $51 million will be invested to help school children learn software coding and other digital technologies, while pathways to permanent residency for science, technology and engineering graduates from overseas will be made easier.

The tax incentives are largely aimed at start-up investors with capital gains exemptions for early stage investors and a 20 per cent tax offset for investments capped at up to $200,000 per year, per investor. This may sound attractive to private investors dreaming of snaring their share of the next Uber, but backing start-ups is not for the faint-hearted, with the majority failing and the risk-reward profile poor compared to other asset classes.

Opportunities abound 

Australia though has plenty of start-up successes and the ideas boom means more support for the junior tech sector via a bigger pool of human talent with the education and specialist skills required to help start-ups succeed on the global stage.

For investors, such businesses worth knowing about can be commonly found in the financial technology, biotech or medical technology spaces. Indeed, many of the ideas boom policies directly promote investment and research in these sectors via the creation of a $250 million Biomedical Translation Fund and $200 million CSIRO Innovation Fund.

Although given the overall emphasis on digital excellence and development, another sector looks the standout winner from the government's largesse.

Enter, Software as a service (SaaS). This is a technology trend every investor should be familiar with given the transformational effect software will have on almost every aspect of business and industry over the next decade and beyond.

The SaaS sector involves start-ups designing and selling software products that can be delivered to customers online in order to help them save time and money via the beneficial effects the software brings to an unlimited number of business processes across private or public industry. In fact the ASX itself already has multiple junior tech companies profiting from this phenomenon:

Sitting in the sweet spot 

Urbanise.com Ltd (ASX: UBN) sells software to building or facilities management companies that helps them improve operating processes as they manage properties. It's growing internationally with underlying earnings of $3.5 million in the last financial year and a strong outlook based on a huge addressable market. The current market valuation is $145 million and after recent price falls shares now trade not far above a level they were offered at during the IPO stage in August 2014.

Touchcorp Ltd  (ASX: TCH) creates software that helps convenience stores sell top up vouchers, gift cards and phone credit to consumers on the move. The software helps electronically facilitate the transactions with the convenience store as the middleman and the company's market value is around $240 million. Total revenues climbed 69% in the most recent half year to $18.4 million and the business retains an exciting outlook.

Prophecy International Holdings Limited (ASX: PRO) is in cyber-security which is an area being directly supported by $30 million of new industry funding under the ideas boom. The global cyber security market is now estimated to be worth $70 billion and Prophecy's software sales have been going through the roof. It has a blue-chip list of global clients keen to bolster their online security, with a market value of $125 million and fast-rising share price.

Foolish takeaway 

Anyone who doubts the potential of SaaS start-ups need only look at the blockbuster IPO of Atlassian, the Sydney-based SaaS start-up founded by two University of NSW graduates in 2002.

The post Technology's powerful promise in 2016 appeared first on The Motley Fool Australia.

Urbanise Ltd (ASX: UBN) shares climbed more than 10% in morning trade to hit 75 cents after the cloud-based Software-as-a-Service property management specialist announced its first New Zealand clients. However, no numbers were provided as to the value of the deal, which made today's share price surge somewhat surprising. At the time of writing shares are trading flat, although the company's business model means it is one to watch as it retains an exciting outlook.

Adacel Technologies Limited (ASX: ADA) is another software specialist that services the global aviation industry primarily in air traffic control software and technologies. This is a niche space, where the company has been growing fast with shares up 13% to a record high of $2.58 today as the high-flyer continues to announce new client wins alongside growing revenues. Profit before tax is expected to climb 50% this financial year.

Australian Dairy Farms Group (ASX: AHF) shares are up 12.7% to 40 cents as the company continues to benefit from the wild excitement over businesses in the dairy-based foodstuffs sector. As the ASX's only listed dairy farmer its strategy is to aggregate high quality dairy farms in Victoria and elsewhere, with the recent announcement of an $11 million acquisition of a dairy company which has certification for rapid clearance of fresh milk into China.

Farm Pride Foods Ltd. (ASX: FRM) shares are up 9% to $1.22 despite the company releasing no news to the market as the farmer and egg supplier continues to receive strong investor support alongside other agricultural businesses. The company's earnings have been growing steadily and the business remains leveraged to growing demand for eggs in the retail sector.

The post Why these 4 ASX shares are soaring today appeared first on The Motley Fool Australia.

Here are 10 of the top movers and shakers on the ASX today starting with 5 gainers…

Beadell Resources Ltd (ASX: BDR) share price soared 22.7% to $0.14, after announcing a maiden mineral resource for its Urucum underground mine of 634,000 ounces of gold at relatively high grades.

AWE Limited (ASX: AWE) share price rocketed 16.1% to $0.72, on the back of surging oil prices.

Ausdrill Limited (ASX: ASL) share price climbed 13.5% to $0.29, but shares in the mining services company are still down more than 70% over the past 12 months.

RedFlow Ltd (ASX: RFX) share price gained 10% to $0.22.

Urbanise.com Ltd (ASX: UBN) share price rose 10% to $0.82, as director Arlene Tansey picked up 71,428 shares on market – usually a good sign.

And here's five companies that were heavily sold off…

Tap Oil Limited (ASX: TAP) share price crashed 18.2% to $0.18, despite the surging oil price.

Migme Ltd (ASX: MIG) share price sunk 6.9% to $1.02, after completing its $10 million capital raising at $1.00 per share. Migme is a social media entertainment platform, including messaging, chat, games, emoticons and stickers.

Australian Careers Network Ltd (ASX: ACO) share price dived 5.9% to $2.70 with the education provider embroiled in alleged rorts in the Federal government's vocational education sector.

Kathmandu Holdings Ltd (ASX: KMD) share price fell 5.8% to $1.31, with increasing uncertainty over the outcome of the takeover offer on the table from New Zealand's Briscoe Group. Briscoe appears to be having problems acquiring shares and says it won't raise offer.

Starpharma Holdings Limited (ASX: SPL) share price dropped 5.6% to $0.68. Shares in the biotech stock soared earlier this month as we reported here, but it's been all downhill from there.

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