4 innovative ASX companies according to top performing small-cap fund managers

When we put together the data for the top-performing funds of the year, there's always a pattern among the winners. This year, half of the ten best-performing Australian equity funds were small and emerging company funds.

Small caps tend to be where you find the most genuine innovation - the next generation of leaders using technology in ways that can actually change how we live and work. We reached out to three of these top-performing managers and asked them each the same question: which company in your portfolio do you consider the most innovative right now, and what's the investment case?

The funds and their managers:

• Jack Briggs, Ellerston Capital - Ellerston Australian MicroCap Fund
• Beyhan Irmako, Ausbil - Ausbil MicroCap
• Nick Sladen, LSN Capital Partners - LSN Emerging Companies Fund

Here's what they said.

Jack Briggs, Ellerston Australian MicroCap Fund 

Wagners Holdings (ASX: WGN)

"CFT poles improve grid resilience as compared to wooden poles - they are more resistant to bushfire, do not require treatment for pests, and do not rot."

Wagners is primarily a building materials business selling concrete, cement and aggregates serving south-east Queensland. Within that is a division attracting serious attention - Composite Fibre Technologies (CFT), which manufactures utility poles and crossarms out of glass fibre rather than wood.

What makes it innovative?

The glass fibre poles are designed to last around 80 years, compared to 20–30 years for softwood poles. For utilities operators, a pole that lasts four times as long is simply cheaper to run before you factor in lower maintenance and the resilience benefits.

The investment case

Briggs forecasts the CFT segment to grow at 30% per annum through FY29, with pole sales rising from around 4,000 in FY25 to a forecast 15,000 in FY26. 

What’s notable is that those assumptions only account for commercial success in Australia. Trial opportunities in the US, UK and New Zealand represent upside that isn't yet in the numbers.

The core Queensland construction business also has its own tailwinds, with population growth, rising property prices and the infrastructure build ahead of the 2032 Brisbane Olympics. 

Briggs is forecasting healthy margin expansion from both volume-driven pricing power and increasing plant utilisation. The stock trades at 13.5x forward EBIT, in line with its long-term history, which he sees as compelling given the above-average earnings trajectory.

"WGN is what we class a 'high conviction position' and one of the largest in the fund.

"A high conviction position for us is a stock which meets all of the following criteria: 1) 3-year view of >15% p.a. return, 2) a strong risk reward ratio of upside at least 3x our downside, and 3) a news catalyst in the next 6 months which will prompt the broader market to agree with our view that the business' earnings power is stronger than current market expectations."

Beyhan Irmako, Ausbil MicroCap

Acusensus (ASX: ACE)

"At today's price, we believe the market is ascribing little value to the potential success of its international growth opportunity."

Irmako describes Acusensus as "a home-grown disruptor to the global automated road safety market". The company built and deployed the world's first automated camera system for detecting distracted drivers using mobile phones at the wheel.

What makes it innovative?

The company has since expanded the same platform to trial impaired driving detection and launch a wearable safety system for roadside workers. 

Despite only being founded in 2018, the company has secured major contracts with the NSW, WA and QLD governments, a nationwide contract in New Zealand, and is now replicating that in the US and UK.

Irmako also points to execution under founder and CEO Alexander Jannink, delivering large-scale government programmes across different regulatory environments.

The investment case

A decade-long decline in road fatalities across developed markets has started to reverse. Acusensus is targeting the "Fatal Five" driving behaviours to solve this challenge.

Government contracts are Acusensus's primary revenue channel, and in Irmako's view, Iong-duration, with high visibility and no counterparty risk. The next test is the US market:

"The recent work-zone speed enforcement contract in Connecticut provides a reference site to establish the company as a credible supplier into the much larger US market."

Acusensus is a modest position in the fund, reflecting where the company sits in its growth lifecycle. Irmako draws a comparison to Generation Development Group (ASX: GDG), which also started as a seed investment before becoming a significantly larger holding.

Nick Sladen, LSN Emerging Companies Fund 

Cogstate (ASX: CGS)

"As a provider of digital cognitive assessment software to the global pharmaceutical industry, Cogstate benefits from recurring revenue, high customer retention and growing demand for clinical trial services."

Cogstate provides digital cognitive assessment software to pharmaceutical companies running clinical trials, primarily for drugs targeting neurological conditions like Alzheimer's and Parkinson's. It holds a near-dominant position in its niche and generates recurring revenue with high customer retention.

Sladen sees this as both an operating leverage opportunity and a way to deepen the competitive moat, as the company expands into higher-value consultative services alongside its core software.

Cogstate estimates its addressable central nervous system (CNS) clinical trial market will nearly double by 2030, while the broader electronic clinical outcome assessment market is expected to grow at around 15% per annum. 

The record sales pipeline reflects both expanding relationships with large pharmaceutical companies and entry into new therapeutic areas beyond neurology.

"We believe these factors position Cogstate to compound earnings at approximately 25% per annum over the next three years, while remaining relatively insulated from broader economic conditions."

Megaport (ASX: MP1)

"Regardless of whether future AI workloads are processed by Microsoft, Amazon, Google, Meta or specialist AI cloud providers, the data must still move securely, reliably and with low latency."

Megaport runs a global software-defined network spanning more than 1,100 connected data centres. 

It initially attracted LSN's attention through improving operating performance, but it was, in Sladen's words, "management's strong execution and disciplined capital allocation that reinforced our conviction."

What makes it innovative?

As AI workloads become distributed across multiple cloud environments, demand for high-performance interconnection grows regardless of which hyperscaler wins the workload. 

Megaport sits right in the middle of this in a position that doesn't depend on picking a winner in the AI arms race. Its acquisition of Latitude.sh has added an AI compute infrastructure business on top of the networking foundation.

The investment case

Sladen believes the Latitude.sh acquisition changes the way the business should be assessed.

"Rather than valuing Megaport solely as a networking provider, investors should increasingly focus on its ability to repeatedly deploy capital into AI infrastructure at attractive returns."

Management expects GPU infrastructure deployments to achieve capital payback in 16–22 months, substantially faster than traditional infrastructure assets. 

"If these returns prove repeatable, internally generated cash flows can be reinvested into successive GPU deployments, creating a capital allocation flywheel capable of compounding earnings well beyond the initial investment."

Megaport is one of LSN's largest holdings.