The ASX has a fast-growing tech sector. No doubt you’re aware of ASX tech share success stories such as SEEK Limited (ASX: SEK), Afterpay Ltd (ASX: APT), and Xero Limited (ASX: XRO). However, there are number of smaller and less well known small-cap ASX tech shares that are starting to gain momentum.

Two, in particular, that I think are worthy of taking a closer look at are: Bigtincan Holdings Ltd (ASX: BTH) and Audinate Group Ltd (ASX: AD8).

These companies operate under very different business models in their respective tech niches. However, I believe both offer investors strong growth potential over the next five years.

Bigtincan

This small-cap ASX tech share focuses on a fast-growing niche in the IT software market commonly referred to as ‘sales enablement’. The company provides organisations and their sales teams with a platform to access, present, and collaborate on a range of content, thereby improving customer engagement.

Bigtincan is a capital-light and highly efficient operation through its software-as-a-service (SaaS) business model.

The company has an established business presence in the large North American market and an emerging presence in the United Kingdom and European markets.

Bigtincan was able to generate a 178% increase in customer cash receipts to $14.9 million during the third quarter of FY 2020. This places the ASX tech share on track to achieve its revenue guidance target of between 30% to 40% growth for FY 2020.

Key customers continue to expand their usage of Bigtincan’s sales enablement platform. These include organisations such as Nike and AT&T.

On 20 May, Bigtincan announced a $35 million equity raising to assist the company with accelerating its growth. The funds will enable Bigtincan to take advantage of the SaaS sector tailwinds and capitalise on any strong merger and acquisition opportunities that may arise in FY2021 to FY2022.

Audinate

Audinate’s audio networking solutions are used in the production of a range of professional audio equipment. These include everything from microphones and speakers to amplifiers and mixers. These networking solutions improve audio quality by converting audio signals into digital data which can then be more easily distributed via computer networks.

This ASX tech share generates its revenues from sales of equipment manufacture and also from royalties and software licensing fees.

Recent revenue growth has also been strong for Audinate. Unaudited revenue for its most recent quarter rose by 14% on the prior corresponding period to US$5.3 million. Audinate believes it is currently in a reasonably strong position to combat any further challenges arising out of the COVID-19 pandemic, with a strong balance sheet and $30.9 million cash on hand.

More reading

• Why Adairs, Nick Scali, SEEK, & Splitit shares are storming higher
• Looking to buy ASX technology shares? Here are 4 to consider
• 3 quality ASX shares to buy now to get rich later
• Why a2 Milk, Afterpay, and Pushpay shares just hit record highs
• 3 excellent small cap ASX shares to add to your watchlist

Phil Harpur owns shares of AFTERPAY T FPO, SEEK Limited, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AUDINATEGL FPO, BIGTINCAN FPO, and Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended AUDINATEGL FPO, BIGTINCAN FPO, and SEEK 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.

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WAM Research Limited (ASX: WAX) has revealed some of the best ASX shares to own for strong returns for your stock portfolio.

What is WAM Research?

WAM Research is a listed investment company (LIC). The job of a LIC is to invest in other shares on behalf of shareholders.

Some LICs invest in large ASX shares, others target smaller ones. Then there’s another group of LICs that look for the best internationally-listed shares to buy for their portfolios.

WAM Research is looking for ASX shares that are the most exciting undervalued growth opportunities in the Australian market.

Why follow what ASX shares this LIC invests in?

It’s true that anyone can name some shares that it thinks are worth buying. Over time a fund manager can create a track record of choosing great ASX shares at the right price. If they’re right, the results will speak for themselves.

Wilson Asset Management is one of the most respected fund managers in Australia with a great track record.

WAM Research changed its investment strategy in July 2010. The LIC’s investment portfolio performance since then, before fees and expenses, has been 14.1% per annum. The S&P/ASX All Ordinaries Accumulation returned 7.6% per annum in that same timeframe. So WAM Research’s gross performance has been better by 6.5% per annum.

I think it’s worth following what this investment team is doing with ASX shares if WAM Research can outperform by that much.

May 2020 update

At the end May 2020, WAM Research’s portfolio had outperformed the index by 5% in FY20 to date. During the May 2020 update WAM Research said that significant contributors to the solid investment portfolio outperformance in the month included auto parts business Bapcor Ltd (ASX: BAP), education placement provider Idp Education Ltd (ASX: IEL) and home furnishings retailer Adairs Ltd (ASX: ADH).

The reason behind owning Bapcor was an anticipation of an increase of car usage as the coronavirus lockdown measures began to reverse. During the month Bapcor raised $56 million from a share purchase plan, adding to the $180 million institutional placement completed in April. This put the balance sheet in a strong position. 

During May 2020 the LIC invested more into ASX share IDP Education. The idea here is that WAM Research expects international students’ tertiary education to recommence faster than expected by the market.

In May’s trading update Adairs said that online sales had beaten expectations and more than made up for the lost revenue from closed stores. Online sales grew 221% in the period. WAM Research also pointed out that the company is managing its working capital and reducing costs across the company. The company’s update today proves it’s still on a good track. 

The WAM Research team stated that they continue to see opportunities in undervalued companies such as Adairs that are able to shift their focus to growing online demand.

What are some of the ASX shares that WAM Research owns now?

At the end of May, its top 20 holdings still included Adairs, Bapcor and IDP Education.

Other ASX shares it owned included gambling machine and gaming business Aristocrat Leisure Limited (ASX: ALL), shipbuilder Austal Limited (ASX: ASB), appliance company Breville Group Ltd (ASX: BRG), natural beauty business BWX Ltd (ASX: BWX), plus-size clothes retailer City Chic Collective Ltd (ASX: CCX), Codan Limited (ASX: CDA), Cleanaway Waste Management Ltd (ASX: CWY), agri business Elders Ltd (ASX: ELD), real estate portal business REA Group Limited (ASX: REA), telco TPG Telecom Ltd (ASX: TPM) and energy business Viva Energy Group Ltd (ASX: VEA).

My own take

I agree that the lifting of COVID-19 restrictions and the shift to online shopping opens up some exciting opportunities for ASX shares like Adairs. City Chic was already selling a good proportion of items online before the pandemic hit. City Chic is one of my top long-term small cap picks. BWX seems to have turned a corner, so that could be one to watch in FY21.

More reading

• Why Adairs, Nick Scali, SEEK, & Splitit shares are storming higher
• Adairs share price soars 16% on trading update and FY20 guidance
• Why I would buy Telstra and these ASX 200 blue chip shares
• ASX 200 falls 0.9%, Afterpay share price hits new record
• What are the best ASX shares for dividends?

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited and Idp Education Pty Ltd. The Motley Fool Australia owns shares of and has recommended Bapcor and BWX Limited. The Motley Fool Australia has recommended Elders Limited and REA 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.

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