I think a little exposure to small cap shares can be a great thing for a portfolio and has the potential to put it in position to outperform the market return.
After all, over the last 12 months the Small Ordinaries (Index: ^AXSO) (ASX: XSO) has vastly outperformed the benchmark S&P/ASX 200. During this period the Small Ordinaries has gained 15.5%, whereas the benchmark index is up just 2.9%.
In light of this, I have picked out three small cap shares that I think would be great additions to most portfolios today. They are as follows:
ELMO Software Ltd (ASX: ELO)
ELMO Software is a cloud-based talent management software solutions company that listed on the Australian share market last year. Since listing it has vastly outperformed expectations and smashed its prospectus forecasts. This trend looks set to continue in FY 2018, with management recently advising that it expects full-year EBITDA to grow to $2.7 million this year. This is more than double the $1.2 million of EBITDA it achieved in FY 2017.
Helloworld Ltd (ASX: HLO)
One of the best performing areas of the market during earnings season has been travel shares. Although its bigger rivals have taken the headlines, Helloworld turned in a quality performance of its own thanks to the growing demand for its integrated service offering. This demand led to a half-year profit before tax of $26 million, up 39.2% on the prior corresponding period. Management expects more of the same in the second-half.
National Veterinary Care Ltd (ASX: NVL)
Another top small cap share I think investors ought to consider is National Veterinary Care. I'm a big fan of this veterinary company and feel confident it could be a great long-term buy and hold investment. Thanks to a combination of organic growth and growth through earnings accretive acquisitions, I think National Veterinary Care is capable of growing its earnings at an above-average rate for the foreseeable future.
