3 small-cap ASX shares Celeste is riding off into the sunset on

Are smaller companies set to go gangbusters in 2023? Here's a trio of stocks to test that hypothesis.

| More on:
three children wearing superhero costumes, complete with masks, pose with hands on hips wearing capes and sneakers on a running track.

Image source: Getty Images

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

If you subscribe to the theory that small-cap ASX shares are due for a massive resurgence in 2023, there's just one question to ask.

Which stocks to buy?

Fortunately, the team at Celeste Funds Management this week explained why they love three of their holdings for the long run, despite mixed recent performance.

'Strong' update belying the share price tumble 

Insurance services provider PSC Insurance Group Ltd (ASX: PSI) saw its share price plunge 5.2% over January.

That puzzled Celeste analysts, who thought a late December operational update was "strong".

"Trading in 1H23 was ahead of budget with underlying EBITDA growth of 18% to 20% on the prior corresponding period," stated Celeste's memo to clients.

"Given strong 1H23 performance, the full year result is expected to come in at the top-end of the guidance range."

Last May, PSC announced that it was entering into a joint venture with AUB Group Ltd (ASX: AUB) for the retail business of UK brand Tysers.

Unfortunately, that still hasn't got off the ground, due to delays with regulatory approvals from British authorities.

That may have had a bearing on PSC's share price, but Celeste analysts insisted "both companies remain committed". 

"On a global macro level, the January reinsurance renewals should underpin further hardening of insurance premiums and provide a solid tailwind for broker earnings growth."

The PSC share price is up 1.94% compared to a year ago, while paying out a 2.5% dividend yield.

Big sale could return capital to investors

The HT&E Ltd (ASX: HT1) stock price went the opposite way last month, rising a spectacular 16.1%.

The Celeste team attributed this to its jettison of a peripheral business.

"Early in the month, the company announced it had signed a binding agreement to sell its 25% interest in CPaaS business Soprano to Potentia Capital for $66.3 million cash," read the memo.

"The sale price implies an 8.8x multiple on FY22 EBITDA and comes after a previous non-binding agreement to sell the stake to Link Mobility Group AS (OSE: LINK) was terminated in September 2021."

The sale means shareholders of the media company could benefit, either directly or indirectly.

"The disposal of the non-core asset likely moves HT&E to a net cash position providing capital flexibility to both continue to invest in the core radio business and potentially return capital to shareholders."

Despite the great start to 2023, HT&E shares have still plunged more than 44% over the past 12 months.

Portfolio grows 10% in six months

Litigation finance provider Omni Bridgeway Ltd (ASX: OBL) enjoyed an 11.6% boost in its stock price in January.

According to Celeste Funds analysts, the company reported a "strong" December quarter that took the total estimated portfolio value up to $29.8 billion.

That's 10% higher than what it was on 30 June.

"There remains $228 million of indicative opportunities in the investment pipeline, which, if converted, would make up an additional 41% of the FY23 commitments goal."

Created with Highcharts 11.4.3Omni Bridgeway PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

The Celeste team also noted how a particular investment was offloaded during the quarter.

"The secondary market continues to prove useful in accelerating cash returns."

Omni Bridgeway is also growing overseas.

"The business expanded its geographic footprints in Europe and the US, which should further the diversification of the portfolio and maintain OBL's global competitive advantage."

The Omni Bridgeway share price is up almost 9% over the past year.

Should you invest $1,000 in Arn Media right now?

Before you buy Arn Media shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Arn Media wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 7 February 2025

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended PSC Insurance Group. The Motley Fool Australia has recommended Aub Group and PSC Insurance Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Small Cap Shares

A man slumps crankily over his morning coffee as it pours with rain outside.
Small Cap Shares

Why this Telstra-linked ASX small cap stock just crashed 90%

This small cap is having a very bad session. What's going on?

Read more »

A young boy wearing a hat, sunnies and striped singlet looks fierce and flexes his arm in victory.
Small Cap Shares

The ASX small-cap stock trading at 'half of the earnings multiple of industry leaders'

A leading fund manager sees a lot of untapped value for this soaring ASX small-cap stock.

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Small Cap Shares

These small cap ASX stocks could rise 15% to 70%

Analysts think big returns could be on the cards for buyers of these stocks.

Read more »

A female ASX investor looks through a magnifying glass that enlarges her eye and holds her hand to her face with her mouth open as if looking at something of great interest or surprise.
Small Cap Shares

2 under-$5 ASX hidden gems worth your attention

These buy-rated shares are flying under the radar. Let's see why analysts are bullish on them.

Read more »

Miner looking at a tablet.
Resources Shares

2 small-cap ASX mining shares exploding 40%+ on China tariff news

Investors are sending the small-cap ASX mining shares flying higher on Wednesday.

Read more »

Siblings jumping on a trampoline.
Small Cap Shares

3 ASX small-cap shares with a 'solid growth outlook' for 2025

A leading fund manager expects strong growth from these ASX small-cap stocks in 2025.

Read more »

A little girl with red hair runs excitedly with a rocket strapped to her back, trying to launch.
Small Cap Shares

Guess which ASX small-cap stock exploded 154% on big US news!

ASX small-cap stocks carry added risk, but also sometimes offer supersized rewards.

Read more »

A group of businesspeople clapping.
Healthcare Shares

This fund returned 109% in 2024. Here are 2 of its best-performing ASX shares

Small caps proved to be the winners last year.

Read more »