It's been a busy week for small-cap stocks, thanks to a falling ASX pretty much only small caps have risen at all in the past five trading days.
As many investors know, smaller stocks can be an excellent way to grow your wealth as they sit outside the well-known and covered stocks in the ASX200. However with so many big names falling recently, I'm not convinced that successful small-caps offer the same appeal as they did a few weeks ago.
Here's what you need to know about recent rises at:
Bellamy's Australia Ltd (ASX: BAL) – last traded at $3.73, up 137% for the year
Baby food and formula maker Bellamy's Australia soared today after management announced that its second-half profit would jump sizeably compared to the first half this year. First half revenue already grew 141% on 2013, while profit after tax leapt 137% and earnings per share jumped 71%.
Existing profits of $3.2 million are small, but importantly allow the company to experience very rapid growth (as a percentage of profit) compared to larger companies. An expansion into Asia is promising as Bellamy's is targeting large markets in China, Vietnam, and Malaysia. Nevertheless most of the company's recent growth comes from domestic sales, while export revenue grew 25%.
I personally will wait for the full-year report before considering a purchase, but Bellamy's looks like it could be a good medium-risk, high-reward buy for the long-term investor.
Yowie Group Ltd (ASX: YOW) – last traded at $0.79, up 45% for the year
Shares in children's toy-maker Yowie Group fell in trading today, spiting my efforts to include it as a 52-week high. Nevertheless shares remain close to their highest point all year as investors pin their hopes on the success of the group's US rollout.
Contributor Andrew Mudie pointed out that Yowie Group has an exclusive patent on 'non-embedded chocolate inclusion products' until 2019, which blocks major Yowie competitors Kinder Surprise and Ferrero Group International from selling their products in the US market. This provides Yowie with a beach-head to establish a market presence, and initial sales have been promising.
The company has experienced a significant turnaround in its books so far and could become profitable as early as next year. I would wait either for a lower price or for further signs of success in its large-scale rollout, but Yowie Group could be a good speculative buy for the right investor.
Ziptel Ltd (ASX: ZIP) – last traded at $1.19, up 466% for the year
One of the strongest performers of the past twelve months, mobile telecom provider Ziptel has soared dramatically since the announcement of its global rollout in the past few months. A partnership with marketing agency Airloyal will help promote Ziptel's ZipT app throughout India and south-east Asia and the company is hoping to add an additional 5 million users in the next 12 months.
Cricketer Brett Lee has been signed as the company's global ambassador, and investors have high hopes for the stock. I am not confident the company is a sound investment at current prices, as much depends on Ziptel successfully delivering on its ambitious customer targets. The company made just $352,000 in revenue in its most recent half-year report and I would wait for signs of growth before considering a purchase.
