Small cap ASX shares are a great place for sensible investors to focus their attention.

Specifically, I’m talking about companies below $500 million in market capitalisation (click here to learn what that means).

Many great small companies like Afterpay Touch Group Ltd (ASX: APT), Nanosonics Ltd (ASX: NAN) and TPG Telecom Ltd (ASX: TPM) have risen from this arena. Many have also failed — I outlined 5 ways to avoid losing money in this article.

Here are 3 quick reasons I buy small cap ASX shares.

1. (lack of) Analyst coverage. 

Take a great small company like Pushpay Holdings Ltd (ASX: PPH), the Kiwi church software business. Despite almost doubling in around two years, just four professional analysts follow the company, up from three last month.

By contrast, Commonwealth Bank of Australia (ASX: CBA) currently has more than a dozen expert stock analysts following its every move and announcement. That means it’s harder for you to discover something about CBA that hasn’t already been researched and valued.

2. Technology focus

In the ASX 200 (INDEXASX: XJO), the top 200 companies by value, the majority of investors’ focus is given to banks and resources companies. While companies like Seek Limited (ASX: SEK) and Carsales.com Ltd (ASX: CAR) are changing that, look outside the ASX 200 and you’ll find many more exciting tech companies.

3. Growth. 

This is obvious. Australia is a small-ish market so if you own a niche small business you have a better shot at making outsized returns if you find the companies early.

For example, when your company gets to the size of Afterpay, oftentimes the only way it’ll be able to multiply your money is if it successfully expands overseas. I like to buy shares before the company goes global.

Summary

Small-cap shares are undoubtedly risky, which is why it’s vital to have a focus on the highest quality companies, with great products and management.

That’s what I do for a living. I recently unearthed these two gems…

After searching through a market with over 2,000 shares, our expert investment analyst has narrowed it down to just 2 of his favourite rapid-growth shares in a FREE report to Rask Media readers.

Over the past five years, these two shares have gone from being 'tiny caps' to being serious contenders for the ASX 200.

Idea #1 is taking on the world, starting with the huge USA healthcare market.

Idea #2 uses a 'printer and cartridge' type model to get large and established customers: a) using their healthcare industry-leading product, b) paying for it again and again and again... so it's little wonder this company is tipped to grow at a rapid pace in 2019.

Access the free report by clicking here now. Absolutely no credit card or payment details required.


Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

At the time of publishing this article, Owen Raszkiewicz does not have a financial interest in any of the companies mentioned.