I think that one of the best ways to make market-beating returns is to have a little exposure to the small cap side of the market.
After all, it wasn't that long ago that Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX) were classed as small caps. Whereas now they are multi-billion dollar market darlings and still growing.
The key is identifying which small caps have the potential to grow materially in the future.
Four which I think have significant potential are listed below. Here's why they could be worth a closer look:
Alcidion Group Ltd (ASX: ALC)
Alcidion is an informatics solutions company. It provides software which aims to improve the efficacy and cost of delivering services to patients and reduce hospital-acquired complications. I believe it is well positioned for growth thanks to the growing trend for healthcare organisations to shift to a paperless environment.
LiveTiles Ltd (ASX: LVT)
LiveTiles is a digital workplace platform provider that is aiming to simplify processes and enhance productivity through the creation of internal dashboards, intranet portals, and collaborative online working environments. Last week it reported annualised recurring revenues to $52.7 million, up 130% on the prior corresponding period. This is still only a fraction of its total market opportunity worth $13 billion.
Paradigm Biopharmaceuticals Ltd (ASX: PAR)
Paradigm is a growing biotech company. It is repurposing Pentosan Polysulfate Sodium (PPS) to treat osteoarthritis. The trial results of the drug, ZILOSUL, have been very promising. This is a big positive given its massive market opportunity. Management estimates that there are over 31 million osteoarthritis sufferers in the United States market. This is expected to grow in the future due to ageing populations.
Volpara Health Technologies Ltd (ASX: VHT)
Volpara is a provider of software that uses artificial intelligence imaging algorithms to assist with the early detection of breast and lung cancer. Due to the growing popularity of its software with radiologists across North America, it has been growing its recurring revenues at a rapid rate. I expect this strong form to continue this year and be boosted by recent acquisitions.
