'Plenty of upside': 2 ASX small-cap shares to buy while they're cheap

One of these stocks has doubled since the start of the year. See what one expert is recommending to add to portfolios right now.

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Even though the S&P/ASX 200 Index (ASX: XJO) is up so far this year, small-cap shares still haven't recovered from the disaster that was 2022.

That's because much doubt still hangs over the economy, with the impact of 12 interest rate rises still filtering through consumers and businesses.

The idea is that larger companies are better equipped to deal with downturns because of their pricing power, buying power, and economies of scale.

But that might mean you could buy some small-cap shares right now at the bottom of their cycle.

Here are two examples that Marcus Today equity analyst Damien Shaw is recommending this week:

'The company is trading at a discount'

Although it no longer occupies the front page of newspapers, the energy crisis is still lingering in the background as the western world deals with an extended period of missing Russian supply.

Plus most Australians have seen their energy bills skyrocket from this month as their tariffs have shot up in response to global challenges.

Karoon Energy Ltd (ASX: KAR), with assets in Brazil and Australia, is thus a buy for Shaw.

Created with Highcharts 11.4.3Karoon Energy PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

"Production at its Bauna operation in Brazil has resumed and was recently averaging about 33,000 barrels of oil a day," Shaw told The Bull.

The stock price is at a tempting dip at the moment, closing Monday at $2.02.

"We believe the company is trading at a discount given the shares have fallen from $2.41 on April 11," he said.

"The company would benefit from any increase in the crude oil price."

It seems Karoon Energy is a popular pick in the professional community.

According to CMC Markets, a stunning nine out of 11 analysts recommend it as a buy. Seven of those think it's a strong buy.

ASX share that's 100% up this year

For those with more appetite for risk, Shaw is tipping EBR Systems Inc (ASX: EBR).

"This medical technology company has been attracting investor attention following positive clinical trial results surrounding its wireless cardiac pacing device for heart failure," he said.

"The company is targeting US Food and Drug Administration approval."

Created with Highcharts 11.4.3Ebr Systems PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

Indeed many investors are excited about EBR's prospects, doubling the share price since the start of the year.

However, the stock has settled down somewhat in recent weeks, trading about 23% lower now since its 29 May peak.

"EBR has a stronger balance sheet after a recent capital raising," said Shaw.

"We consider EBR a speculative buy. But there is plenty of upside if all goes to plan."

While coverage is sparse, all three analysts currently surveyed on CMC Markets consider the stock as a buy.

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 no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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