Fund manager reveals 3 ASX small caps that could beat the market this year

NAOS Small Cap Opportunities Company Ltd (ASX:NSC) has revealed 3 ASX small caps that could beat the market this year.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

NAOS Small Cap Opportunities Company Ltd (ASX: NSC) has revealed three ASX small caps that could beat the market this year.

Naos is a fund manager that believes in holding a high-conviction portfolio of businesses, typically around 10 holdings, that are industrial in nature and worth holding for the long-term.

In the listed investment company's (LIC's) March 2019 update, Naos outlined three of its holdings it believes could do well this year:

MNF Group Ltd (ASX: MNF)

MNF is a leader in providing voice over internet protocol services and other similar offerings. The share price is down around 25% over the past year, but Naos said a catalyst which could boost MNF is if it achieves its second half FY19 earnings and that the FY20 guidance may be too conservative.

The upcoming launch of the Singapore operations also has Naos interested with additional geographical expansion a possibility in the future.

I agree that MNF looks interesting at this price level, but it is very important that MNF does indeed hit its guidance, or the share price could take another tumble.

Consolidated Operations Group Ltd (ASX: COG)

For readers unfamiliar with this one, it's a financing and leasing business. Naos pointed to the fact that COG has received a number of informal and preliminary enquiries as a reason why COG's momentum is one to keep an eye on.

The potential for COG to launch a white label finance product that is funded or partnered with a big four bank for prime auto loans is also exciting, according to Naos.

Anything in the loan space is a very interesting opportunity at the moment. Whilst the royal commission is causing banks to be much more cautious about lending these days, the slowing Australian economy could mean a rise of loans going bad.

BSA Limited (ASX: BSA)

BSA assists clients in building services, infrastructure and telecommunications. It is a beneficiary of the expanding NBN, but Naos thinks the catalyst for BSA could be the conclusion of the strategic review of the HVAC Build segment and potential acquisitions that would add other strings to BSA's bow.

BSA itself has said there is a strong pipeline of opportunities in all of its core markets and it has identified potential in other markets.

Foolish takeaway

Each of these companies are a lot smaller than typical ASX200 growth shares, so they are likely to be more volatile than large caps. However, each of them have promising potential over the next few years – I can see why Naos owns them.

Motley Fool contributor Tristan Harrison owns shares of NAO SMLCAP FPO. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Growth Shares

Two plants grow in jars filled with coins.
Growth Shares

3 ASX 200 growth stocks up more than 100% in 1 year that could charge higher

It's been a memorable year for shareholders of these 3 companies.

Read more »

Afterpay share price a happy shopper with a wide mouthed smile holds multiple shopping bags up around her shoulders.
Growth Shares

The pros and cons of buying Zip shares in June

Should investors buy now or wait until later?

Read more »

A smiling woman holds a Facebook like sign above her head.
Growth Shares

3 ASX growth shares I'd buy for the next 10 years

Let's see why these shares could be top picks for the long term.

Read more »

wheelchair user in an office talking on mobile phone
Growth Shares

Why I'd buy this ASX growth share instantly

I’m calling on this stock to deliver strong returns.

Read more »

A happy boy with his dad dabs like a hero while his father checks his phone.
Growth Shares

2 ASX growth shares to buy in June: experts

These businesses have strong growth potential.

Read more »

Rocket powering up and symbolising a rising share price.
Growth Shares

Buy these stellar ASX growth shares with $1,000

Analysts think these shares would be top buys right now.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Growth Shares

These ASX growth shares could rise 18% to 30%

Let's see which shares are being tipped to rocket.

Read more »

Ecstatic woman looking at her phone outside with her fist pumped.
Growth Shares

Goldman Sachs tips this ASX 200 growth stock to rise 35%

Let's see what the broker is saying about this growing company.

Read more »