While it would be naïve to suggest it is easier to outperform the market by investing in small caps, it is reasonable to argue that there are more mispriced opportunities. With that in mind, it's understandable that many savvy investors choose to focus their time and effort on identifying opportunities amongst smaller stocks. Here are four small companies which have recently soared to 52-week highs and could be worth adding to your watchlist.
Infrastructure, engineering and construction group Seymour Whyte Ltd (ASX: SWL) gained 5% last month and is up nearly 41% in the past year thanks to strong revenue and earnings growth. The earnings growth in turn led to a 43% increase in the interim dividend.
Australian Ethical Investment Limited (ASX: AEF) as the name suggests is a fund manager who offers its investment services utilising an ethical screening process. Like many other fund managers, AEF enjoys leverage to higher equity markets. In the past year the shares have gained 54%.
Enero Group Ltd's (ASX: EGG) share price has soared 64% in the last three months during which time it reported its interim results which showed a 135% increase in EBITDA. Having undertaken major restructuring efforts in the past few years, the marketing and communications group is on a much more solid footing.
Shine Corporate Ltd (ASX: SHJ) has followed in the footsteps of fellow legal services group Slater & Gordon Limited (ASX: SGH) by listing on the ASX. The stock has been a steady performer since listing almost one year ago, however the recent interim results put a rocket under the stock price with the shares gaining 27% in the past month alone.
Foolish takeaway
Despite enjoying stellar gains there is still reason to be positive about the potential for further share price gains over these four stocks. Each stock appears to be trading on undemanding multiples and given the outlook for earnings growth further share price appreciation could be warranted.
