Investing in small cap shares is undoubtedly more risky than investing in blue-chip shares, but they also offer the possibility of significantly higher returns as compensation for this risk.
While it is probably a good idea for more conservative investors to steer clear from speculative shares, I think every investor should have a portion of their portfolio allocated to small cap shares that have the potential to grow into much larger investments.
With that in mind, here are three small-cap shares that I believe have bright futures ahead of them:
Touchcorp Ltd (ASX: TCH)
Touchcorp is a software company that focuses on providing payment solutions to retail businesses. The company also holds a large stake in Afterpay Holdings Ltd (ASX: AFY), which is also focused on providing consumer friendly payment solutions. Although the payments market is very competitive, Touchcorp has delivered a number of encouraging financial results that suggest the company is on the right track to becoming a leading player in the sector. With a market cap of just $250 million, I think Touchcorp is worth closer investigation.
3P Learning Ltd (ASX: 3PL)
3P Learning is another technology company, although it focuses on providing educational programs for school children. It has enjoyed great success in Australia so far and while its plans to dominate the US market haven't gone to plan the company has taken some steps to rectify this including the appointment of a new CEO who is skilled in technology platforms. Although it might still be a little too early to back 3P Learning at this point in its turnaround strategy, it nevertheless remains a company with a huge amount of potential.
Australian Vintage Limited (ASX: AVG)
Australian Vintage shares have fallen around 18% since the wine-maker announced a profit downgrade which was largely caused by unfavourable currency movements. Importantly, the company's underlying operations continue to show improvement and its strategy to focus on branded wines has produced a significant uptick in sales volumes. Although investors shouldn't expect too much from this year's financial results, I think the medium-term outlook for the company is exciting especially when you consider it has a market capitalisation that is currently hovering just above $100 million.
