What are ASX Small Caps?

Small Caps are the group of smaller companies listed on the Australian Stock Exchange. The size is determined by market cap or market capitalisation. This is simply the current share price times the number of shares the corporation has listed on the ASX. This market cap figure tells you how big or small the corporation is.

Small Caps have a market capitalisation of between $50m and $600m.
ASX shares with a market cap of under $50 million are emerging stocks or micro-caps. 

There are over 2,000 shares listed on the ASX and most of them are small. They are less researched and rarely covered in the news, but it is where Australia's investors find the big new share price growth opportunities. Follow our advice to access the top shares to buy.

Small Caps are also called Growth Stocks, Emerging Companies, Micro-Caps or Penny stocks but essentially these terms all mean the same thing, it means they are small.

Why invest in ASX Small Caps?

Investors start with Small Caps because of their huge growth potential. These shares can double, triple and more in value.  You need a couple of Small Cap shares in your portfolio to double and triple to generate excellent financial results. It’s this outperformance that you simply can’t achieve anywhere else or with any other financial investment. Get:

  • Huge share price growth potential
  • Dividends
  • Diversification
  • Investors can start without a lot of money

Share Price Growth

You want strong performance from your investment. Share price growth is the primary reason to start investing in Small Caps because this will deliver you oustanding financial results.

Earn income

But you can also earn income if they pay dividends. 50% of the shares we recommend pay dividends. When small companies pay dividends it shows that the company is a quality investment and it represents an important price signal for the market. 

Shares to buy under $5

Many small caps are cheap, costing under $5 to buy, so you can start small and build up a portfolio or group of shares over time.

You don’t need a lot of money so start investing in smaller shares. This is one of the key benefits. To buy $100 CBA shares at $85/share you need $8,500. But if you invested that money into a smaller company you could invest $2,000-$2,500 in 3-4 different shares giving you a bigger personal holding.

Small Caps also provide diversification at cheap prices. Diversification means reducing your risk by not putting all your investment eggs in one basket. You can buy of shares in well run companies that operate in many differnt types of growth industries, from corporate biotechs and mining, to australian health, smaller banks, pharma, energy companies or food producers.

There is a vibrant group of shares at the tail end of the ASX so investors can access exposure to different growth industries and varied risk profiles cheaply.

If you are looking for true share price growth, then growth stocks should be part of your personal balanced portfolio. Of course you need to consider your own financial situation or needs before you begin investing in this type of investment. Please see that you follow the right independent share research and services from a licensed provider with a proven track record of investment performance. See our investment performance over the last 10 years here. You don't choose a share because it's popular you need to follow quality advice and access information and reports that will give you education too. Receive our  research and join now.


What is an example of a Small Cap?

A Small Cap is a company that is little by size. They have listed on Australia's ASX to access capital to fund growth. Some examples of businesses that were not big when we first recommended them include:

  • Kogan Pty Ltd (KGN)
  • Medical Developments Pty Ltd (MVP)
  • Evolution Mining Pty Ltd (EVN)
  • Macquarie Telecom Pty Ltd(MAQ) 
  • Austal Pty Ltd (ASB) 

These business operates in every group, industry and sector, and all companies, even BHP at one time started out small! The point is that they don't all stay that size and investors want to be part of their huge growth potential.

Australia's successful smaller businesses comes in many shapes and sizes but they are often in niche or emerging industries or are disrupting the way traditional companies do business, or are inventing new markets. Think Australia's healthcare, mining, resources, medtech, funds manager, pharma, and many other corporate activtities.

There are hundreds of examples of Small Caps that turn big! Some companies you have now heard of, the classic recent example being Afterpay but when they first listed you probably hadn’t heard of them. But we had! We first covered Afterpay Pty Ltd at $2.51! When they are still little they don’t cost much to buy. Join Now to follow our advice and access our Best Stocks to Buy Now.


What are Blue Chips and what are the ASX market indices?

Australia has one of the most concentrated markets in the world with the top 10 (the banks, Telstra, BHP) comprising around 50% of the total value of the ASX!

To give some perspective on size, the All Ordinaries contains the 500 largest ASX listed corporations and accounts for roughly 90% of the Australian equity market. The Commonwealth Bank Australia (CBA) which is the largest stock has a market capitalisation of $150 billion, and the smallest stock in the All Ordinaries has a market capitalisation of $50 billion. These companies are huge.

The S&P/ASX Small Ordinaries Index is used as a benchmark for Small Cap ASX equity portfolios. Some of the stocks in the Small Ordinaries are still very big and include Fisher & Paykel, Seven Group, and Breville with market caps still in the billions. You could hardly describe them as little. With a market cap above $600m or in the $billions a company’s opportunity for fast growth becomes much harder.

Why you need to know about the S&P/ASX Emerging companies

You need to know about emerging shares because they offer ASX investors amazing growth opportunities. These Emerging company’s group consists of 200 Australian Micro-Cap companies ranked between 350 and 600 by market capitalisation and have met a reasonable liquidity test, which means that it is reasonably easy to buy and sell the share.

It’s the shares between $50-$600 million that are under researched, not covered in the news or by stock brokers and fund managers as they are not big enough for the large fund managers to invest in. This is our niche and area of expertise.

Individual investors have an advantage over the professionals in this space. Of course, before you start investing in the share market you need to consider your financial situation or needs and first get independent financial advice and research by a licenced provider like us. Join now and follow our advice.

You want your investment to move out of the Emerging index to bankbig returns. Examples of Under the Radar Report's recommendations that have done this include:  Splitit, Mermaid Marine, and Northern Resources to name a few and it’s this size of companies where individual investors can find big growth opportunities.

Your personal wealth grows as the small company grows. There are huge growth investment opportunities which is why investors follow our advice on Smaller Caps.

How to choose Small Caps

You choose to invest in emerging businesses because they give you growth. In other words, their share price can move higher more quickly.

Investing successfully and getting results is all about picking the right share first! It comes down to getting access to quality independent research. These shares are not in the news. You need  advice to find a well run small cap with experienced management, that is positioned for growth and its financials stack up. You need to take care.

To make money from a small cap you need to buy when it’s share price and market cap are low before a big growth run so you don’t pay too much for it. This is how you get true personal financial growth.

At Under the Radar Report we search for value which means we search for a listed business that is currently covering costs, but has an option on greatness. We follow a 7 step process for picking Small Caps:

  1. Look for growing sectors first
  2. Cash is king: check the balance sheet, and check if it's got the cash flow to pay for day to day expenses and to ensure its profits can pay for future growth.
  3. Look at the share price and chart
  4. Quality Management team is really important
  5. What are the Bull Points/Bear Points?
  6. Valuation methodologies and ratios
  7. Where is the Catalyst? What will happen in the future that will lead to this stock being valued much higher in the future?

It’s the future catalyst for growth that is at the forefront of every investment. Financial analysis is essential to make sure you are investing in a quality company that is going to reward your investment through share price growth and future dividends.

To find and understand the growth opportunities that these shares provide you first need strong underlying financial analysis. We suggest choosing Small Cap stocks to buy in growing sectors including manufacturing, healthcare, energy, health and food, and technology.

Cash is king and investors should choose shares to buy that have solid cash flow. Without cashflow how can it survive and grow? Management is particularly important earlier on in the business cycle and investors need to check management's expertise.

Look for Bull Points and Bear points, it’s always important to know the risks as well as the future potential.

Investing successfully is about picking a company operating in a growth industry first, that has cash flow, is well run and that has a tangible catalyst for growth. Then you want to make sure that you are paying a reasonable price for that growth. To access our product and to get strong results take out a free trial now.

How to invest in Small Caps on the ASX

When you are ready to buy a Small Cap you can buy them through a stock broker or easily do it yourself with an online share trading platform. It can often be easiest to go to who you bank with as it makes setting up the account easier but check the brokerage fees they charge and the services they offer. Remember to consider your personal financial situation or needs before making any financial decisions.

1. Search and then choose an online broker. It’s very easy to set up a personal account and there are many competitive online brokers to choose from. Remember to compare the brokerage fees you will pay each time you buy and sell. For more information and advice on choosing an online broker, first see our Beginner’s guide to investing.

2. Open your account. It will take a few minutes and is just like setting up any bank account and you need your ID, bank details and TFN.

3. Get a short list. You can get a short list by following the 7 step process above, or by accessing independent advice and share research with us.

You can join now and follow our advice and best shares to buy. You need to know the risks (the bear points as well as the bull points) and to check out the financial statements to ensure the Small Cap you buy is a profitable business with a catalyst for growth.

Our Small Cap share research is independent and we put our members first. Be careful if you google that you are not just getting PR from the investor relations manager and the popular website isn't just promoting the company. You need to follow independent advice to invest successfully. Join today and search one of our 10 best shares to buy, follow our advice and start investing confidently.

It can seem overwhelming but the hardest thing is to hit buy on your first share purchase.

Best Small Cap growth list 2021

Recognising the potential of small cap companies has led to some of the best returns for individual investors. Being an early investor and buying in when a company is still small can lead to some seriously stellar returns.

We first recommended Afterpay when it was just $2.51 in May 2017 and Northern Star when it was only 83c. The returns that can be made from investing before a company is a big name can transform wealth.

Picking Australia's small cap companies is about searching for the catalyst for growth, and following the seven steps to choosing stocks. Make sure you get proper research and advice first.

Not every one will outperform, know your risks, choose companies with good fundamentals that reflect the opportunity for future growth and with smart stock picking, small cap investing can be extremely rewarding. Always consider your financial situation or needs when investing and seek independent financial advice.

The 10 best Small Cap stocks to buy in 2020 that delivered outstanding growth and fast returns.

Afterpay Pty Ltd (APT) tipped at $2.51 now $147.00!

Zip Co Pty Ltd (Z1P) tipped at $0.66 now $12.00!

Northern Star Pty Ltd(NST) tipped at $0.83 now $10.91!

Nick Scali Pty Ltd (NCK) tipped at $1.40 now $11.71!

Codan  Pty Ltd (CDA) tipped at $1.52 now $12.94!

City Chic Collective Pty Ltd (CCX) tipped at $0.48 now $4.09!

Seven West Media Pty Ltd (SWM) tipped at $0.08 now $0.54!

Evolution Mining Pty Ltd (EVN) tipped at $0.72 now $4.28!

Data 3 Pty Ltd (DTL) tipped at $0.99 now $5.93!

Macquarie Telecom Pty Ltd (MAQ) tipped at $8.15 now $50.00!

Successful Small Caps are often disruptive stocks

Disruption stocks have found a lower cost way of currently doing business. They are not encumbered by tradition and turn the market on its head. They can be an excellent investment.

Disruptive companies such as energy, technology and fintech get a lot of news press following high profile successes like  Afterpay Pty Ltd (APT) and Zip Co Pty Ltd (Z1P).

When we first started to follow and research these technology shares in 2017 their valuations were less than $500m. Fast forward to today and APT alone is over $28bn, while Z1P is a “measly” $3.1bn.

This kind of appreciation of value sees many new to the market forgetting about the past disrupters Seek.com and REA in the world of digital advertising. These companies are now the establishment.

We give you 3 disruptive sharest to help you profit from disruption before they hit the news! Don't forget our advice is independent and we take care recommending each and every share. Always consider your personal financial situation or needs before your start investing.

All these shares led to our members who followed our advice making huge gains, but it’s important to remember that disruption most often originates in Small Caps.

As we say, disruption is the natural space for small businesses looking to grow quickly by building market share at the expense of their bigger counterparts.

Watch these Small Caps in 2021

These are exciting shares to watch as they often operate in Australia's niche industries and are experiencing high growth.

It’s fascinating to following a business s as it first takes its product or service out to a bigger audience and transforms itself into a big company.

But making money is not just about picking winners. It’s also about taking profits to generate big gains. You need to recognise value and take profits to benefit from excess optimism as well as pessimism.

One of the most important contributors to returns is the price you pay. You could also add to this that you can’t live off paper profits and it’s important to take profits.

We research and follo over 100 little companies that we have selected for their growth potential. If you’re looking for advice and performance but finding it difficult to do the research and stock picking yourself, you can join up and follow our advice and get started now. We have done all the hard work for you. Our investment analysts and funds manager find the best shares and tell you when to buy and when to sell.