Although small-cap shares have underperformed the broader market so far this year, I believe in the long-term this area of the market has the potential to generate outsized returns for investors.
Three small-cap shares which I believe have significant growth potential are listed below. Here's why I think they could be great buy and hold investments:
Although the Apollo Tourism & Leisure Ltd (ASX: ATL) share price has rallied 35% since listing on the ASX at the end of last year, I don't believe it is too late to invest in the recreational vehicle retailer. As well as receiving a boost from the tourism boom, Apollo is a company I expect to benefit from the baby boomer generation. The cashed-up "grey nomad" market is a key reason why Apollo posted an 18.3% increase in revenue and a massive 72% increase in earnings before interest and tax for the first-half of FY 2017.
The Freedom Insurance Group Ltd (ASX: FIG) share price is another which has gone gangbusters since listing on the ASX. Despite almost doubling in value its shares are still trading at under 14x estimated FY 2017 earnings. I can't say I'm surprised to see the life insurance products specialist's shares rally by so much. Demand for its products has been so strong the company has had to upgrade its pro forma full-year guidance twice already since listing at the end of last year.
So far this year the Zenitas Healthcare Ltd (ASX: ZNT) share price is up just 2%. I feel this could make it an opportune time to invest in the home care and health services company. Zenitas provides a range of community-based health services that provide integrated care solutions with the aim of reducing the high cost of acute hospital care. It currently operates 54 locations across Australia, but is intent on growing its network rapidly through an acquisition strategy. With Australia's population ageing, Zenitas is certainly a company worth keeping a close eye on.
