The 10 top-tipped small caps for 2022

Ally Selby

Livewire Markets

We are back (and with a bang, may I add). Lucky for me, my first order of business is celebrating the investment aptitude, skill and flair of you, my dear reader, by collating your top-tipped small caps for the 12 months ahead. 

While your picks from previous years were well and truly on a winning streak - gaining 43% in 2019 and 6.8% during tumultuous 2020, they delivered a particularly bad performance in 2021. In fact, while the S&P Small Ordinaries Index lifted 12.75% during the year, your picks took a tumble for the worst, falling 14% into the red in 2021. 

But who doesn't love an underdog? 

This year, we received a whopping 4,053 ASX-listed stock picks from readers just like you. The companies mentioned in the wire below received 8.14% of your total votes, with market caps ranging from $320 million to as high as $2.4 billion. 

The lucky 10 of 2022 include an up-and-coming audio tech innovator, a global gift-card player, and a handful of battery mineral explorers and excavators too. Only one of your top-tipped stocks sunk lower last year, while the top-performing stock on this list delivered an impressive return of 1,162.50% in 2021. 

Before you throw all caution to the wind, I must share but a brief word to the wise: This list of ideas is not a "set and forget" portfolio, and as you can see from last year's performance, these stocks could fall deep into the red. 

That said, and without further ado, here are the top-small caps for 2022, as chosen by you. 

Note: By publishing this list, we are sharing information from the Livewire readership, and we hope it inspires ideas for further research. This information is not, nor is it intended to be, a set of recommendations. Please do your own research and seek advice from a professional.

Your top-tipped stocks at a glance...

  • The top-tipped stock received only 1.13% of your votes, with hundreds of small caps receiving just one or two votes from readers. 
  • The average market cap of these 10 companies is $1.13 billion. 
  • Most of the stocks you picked this year are tech or resources/materials companies. 
  • Only two of your top-tipped small-cap picks last year were in the green: Lynas Rare Earths (returning 155.53%) and Flight Centre (returning 11.17%). This means only one of your picks from 2021 outperformed the ASX Small Ords benchmark. 
  • The three worst-performing stocks you picked last year were Polynovo (-60.70%), Electro Optic Systems (-60.41%), and Pointsbet Holdings (-40.61%).
  • There were three tied positions this year: 8th, 6th and 4th. 

#10: Audinate (ASX: AD8)

  • Percentage of votes: 0.49%
  • Market cap: $621 million
  • Profitable: No
  • Share price: $8.03

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Audio technology innovator Audinate came in at number 10 on your top-tipped list, with 20 reader votes. Audinate's "Dante" software replaces the need for heavy cables used to connect microphones, mixers and speakers and instead uses a computer network to send video or hundreds of audio channels digitally.

Despite being impacted by COVID-19 lockdowns (the lack of events) and supply chain issues (chip shortages), Audinate reported revenue of $33 million in FY21, up 22% from FY20. Similarly, the audio tech company reported an EBITDA of $3 million, up 50% from the previous period. That said, Audinate recorded a loss of $4.7 million during the financial year, albeit a 17% improvement from the previous year. 

In recent news, Audinate announced it would acquire the video business of Belgian-based tech firm Silex Insight for $6.5 million, with the expectation that the deal could accelerate its video capabilities. 

TMS Capital's Ben Clark recently sang the praises of this up and coming audio tech company, arguing it has one of the strongest levels of profit growth of any company within the small-cap arena. 

Meantime, Shaw and Partner's Danny Younis believes the stock's share price could "double from here". It has already partnered with some of the world's biggest manufacturers of audio and video - think Sony, Bosch, Audio-Technica, Bose and more, and is well on its way to becoming a world leader. 

#8: Frontier Digital Ventures (ASX: FDV) 

  • Percentage of votes: 0.61% 
  • Market cap: $562 million 
  • Profitable: No
  • Share price: $1.54
  • Chart provided by Sharesight

    Frontier Digital Ventures is an online marketplace business operating predominantly within property and automotive across emerging markets such as Asia, Latin America and Africa. After receiving 25 of your votes, it comes in at equal eighth on your top-tipped small-cap list for 2022. 

    Its share price has soared 267% over the last five years (although it was down 13.5% over the past 12 months). 

    During a Buy Hold Sell episode shot in 2021, 1851 Capital's Chris Stott described Frontier Digital Ventures as the REA of car sales in emerging markets - run by ex-REA and ex-iProperty boss Shaun Di Gregorio, who has plenty of skin in the game in terms of his shareholding in the business. 

    In November, Frontier Digital Ventures announced a $40 million capital raise to acquire the remaining interest in Encuentra24, a classifieds marketplace with a presence in Latin America. Meantime, in its latest company report, Frontier Digital Ventures reported revenues up 160% to $21.6 million and losses of $4.3 million in FY21. 

    Also equal #8: Brainchip Holdings (ASX: BRN)

  • Percentage of votes: 0.61%
  • Market cap: $2.37 billion
  • Profitable: No
  • Share price: $1.40
  • Chart provided by Sharesight

    It was truly not a surprise that Brainchip Holdings made it into your top-tipped list for 2021. After all, the stock returned around 61.9% in 2021 and has already skyrocketed around 120% year to date. 

    Brainchip’s neuromorphic technology (which mimics biological neurons in the brain) has the potential to bring artificial intelligence (AI) and machine-based learning to multiple industries. Its Akida AI chip has attracted the attention of major global companies, including Mercedes Benz and Megachips (a Japanese semiconductor manufacturer). 

    After a lengthy search, Brainchip announced it had appointed Sean Hehir as its CEO - a former HP, Fusion-io, and PGi business development executive. Its largest shareholder is still its founder - Peter Van Der Made - who controls about 9.5% of the business. 

    Brainchip reported a balance of US$17.6 million in cash on its balance sheet at the end of June 2021, while its revenue had increased a whopping 5,629% to US$767,545 during the first half. It also reported a net loss of US$9.3 million in the first half, up from US$6.8 million in the previous period.  

    #6: EML Payments (ASX: EML)

  • Percentage of votes: 0.64%
  • Market cap: $1.19 billion
  • Profitable: No
  • Share price: $3.21
  • Chart provided by Sharesight

    EML Payments is the only stock to make a return from your 2021 top-tipped list, receiving 26 votes from readers just like you. After making a surprisingly good recovery from the lows of the COVID-19 crisis, EML's share price took a turn for the worse in May, when the Bank of Ireland announced it would be looking into the global gift-card innovator's Irish subsidiary. 

    Since then, its share price has plummeted around 39%. And while the Bank of Ireland has since stepped back from EML - allowing it to continue to sign on new customers and launch new programs (while staying within the country's material growth restrictions) - EML has since been served a class action from Shine Lawyers - alleging the company failed to disclose information relating to the Bank of Ireland correspondence in a "timely manner". 

    In August, EML reported a net loss of nearly $28.7 million, up 302% from the year earlier. That said, it reported revenue growth of 59% to $192.2 million and EBITDA of about $42.2 million, up 30% from the previous year.

    While it has had its fair share of challenges, Simon Shields, of Monash Investors, believes it could be a winner in 2022.

    "The Bank of Ireland has back-tracked - as much as a central bank or regulator can do so," he said. They're saying, 'Oh, look, there's nothing to see here. We're actually not concerned at all.' Well, the stock price hasn't recovered yet."

    "The growth is going to continue and there's a lot of space for that stock price to move back into.”

    Montgomery Lucent Investment Management’s Dominic Rose agrees, arguing that heightened regulatory scrutiny is to be expected with a stock like EML - and claims the stock still has a long runway of share price growth ahead of it before it returns to pre-crisis levels. 

    Also equal #6: Aussie Broadband (ASX: ABB)

  • Percentage of votes: 0.64%
  • Market cap: $1.03 billion
  • Profitable: No
  • Share price: $4.61
  • Chart provided by Sharesight

    Telecommunications newcomer Aussie Broadband was listed in October 2020 at $1.00 and has since seen its share price soar 361% to $4.61. While its market share is small compared to its competitors, Aussie Broadband has managed to accelerate its customer growth in both business and residential segments. 

    By the end of FY21, the business announced it had a total of 400,000 broadband services, an increase of 53% from the previous period. It also reported revenue of $350 million by the end of FY21, an 84% increase from the previous year, as well as a loss of $4.5 million. Its EBITDA was $19.1 million, a 433% increase. 

    It also has a major acquisition on the horizon, having raised $114 million in September to acquire Over the Wire (OTW), an IT solutions provider, for $390 million. 

    In a recent Buy Hold Sell, Market Matters' James Gerrish pointed to Aussie Broadband as a stock to watch in 2022, arguing that the OTW acquisition will transform the up-and-coming telecom into a business with an enterprise value of around $1.3 billion. 

    If that's not enough, Aussie Broadband is growing at 30%, they could enter the ASX 200 off the back of the OTW acquisition, further M&A could be on the horizon, and it has an "incredible management" team, Gerrish said. 

    #4: Vulcan Energy Resources (ASX: VUL)

  • Percentage of votes: 0.86%
  • Market cap: $1.31 billion
  • Profitable: No
  • Share price: $9.97
  • Chart provided by Sharesight

    Somewhat controversial lithium explorer Vulcan Energy Resources came in at equal fourth in your top-tipped small-cap list for 2022. The company plans to revive an existing geothermal plant in Germany’s Rhine Valley to extract lithium using carbon-negative technology. 

    Vulcan’s share price has risen 4,431.82% over the past five years on this very promise and lifted 275.45% last year despite reporting a loss of $10 million in FY21 (compared to a loss of $3.55 million in FY20). It also suffered a highly publicised short-seller attack from J Capital in October, who Vulcan Energy later sued. 

    Thanks to the recent popularity of lithium explorers and producers, combined with investors desire for "greener" investments, Vulcan Energy pulled off two successful share placement deals in CY21, raising a whopping $320 million. This includes a $120 million investment from Gina Rinehart's Hancock Prospecting, Vulcan Energy's second-largest shareholder, with a 6.5% position in the company. 

    Although it already has supply agreements in place, the Net Zero Lithium project is a long way off shovel-ready. Its demonstration plant is set to open its doors in Q2 2022, while its production process is targeted to kick off in 2024. 

    Also equal #4: Calix (ASX: CXL)

  • Percentage of votes: 0.86%
  • Market cap: $1.05 billion
  • Profitable: No
  • Share price: $6.52
  • Chart provided by Sharesight

    Material processing technology company Calix received 35 votes from readers just like you, after its share price skyrocketed 546% in 2021. 

    For those not in the know, the company “re-imagines the calcination process” to address sustainability challenges, as the "nano-active" materials it produces can be used in “wastewater treatment, lake remediation, aquaculture, crop protection and advance batteries.” 

    The company is also currently exploring renewable ways to produce heat for this calcination process. It also recently released a patent for its new zero CO2 emission iron and steel technology, named ZESTY. And it already counts one of the world's largest cement producers, HeidelbergCement, as a partner, as well as local legend Pilbara Minerals.

    Its major shareholders include Thorney Technologies's Alex Waislitz as well as Regal Funds Management and Australian Super. 

    In fact, when asked what stock he would own for the next five years - Waislitz pointed to none other than this local industrial solutions small-cap. 

    "I think this company has got star potential," he said. "It could have many applications and each one has got big market shares. It could lead to spinoffs of the technology or licensing, but I think it's a company that we certainly believe in." 

    In its annual report, Calix reported a loss of $9.1 million for FY21. However, it also recorded strong revenue growth year on year, up 22% to $29.9 million. It also reported that it had $15.1 million in cash on its balance sheet at the end of June 2021. 

    #3: Lake Resources (ASX: LKE) 

  • Percentage of votes: 0.99%
  • Market cap: $1.2 billion
  • Profitable: No
  • Share price: 99 cents
  • Chart provided by Sharesight

    Lake Resources ended 2021 with a bang, with investors celebrating its 1162.5% return during the year by voting it in third place in your top-tipped small-caps list for 2022. But can this lithium explorer continue to deliver spectacular returns this year? 

    Lake Resources boasts four projects in Argentina’s lithium triangle and recently announced a new 50,000 tonnes per annum (tpa) lithium carbonate production target at its flagship Kachi Project (this was previously a 25,000tpa target). Production at Kachi is expected to kick off in 2024, but it's going to cost US$544 million (or $747 million) to get the project there.

    As demand for lithium grows, Lake Resources is attracting support for its 99.97% battery-quality product, winning major funding commitments from several agencies, including the UK Export Credit Agency (which will fund 70% of the project). 

    In Bell Potter's recently released stock picks for 2022, resources analysts pointed to Lake Resources as an opportunity for the year ahead and provided a target price of $1.37 for the stock. The Kachi project is unique in that it employs an innovative extraction process to recover lithium from a "brine resource", they said. 

    "The key advantages of this technology are a smaller environmental footprint, lower carbon emissions and greater process control," Bell Potter said. 

    Although Lake Resources did end FY21 with a loss of $2.89 million (compared to the $4.90 million loss in FY20), it ended the financial year with $25 million in cash on balance sheet. 

    #2: Life360 (ASX: 360)

  • Percentage of votes: 1.11%
  • Market cap: $1.64 billion
  • Profitable: No
  • Share price: $8.65
  • Chart provided by Sharesight

    Family location-tracking app Life360 took home the silver for your top-tipped small-cap stocks for 2022, after it received 45 votes from readers in our annual Outlook Series survey. For this reason, it may not surprise many of you to learn that in 2021 the stock returned nearly 152%. But can it do it again in 2022? 

    It could well be on its way, with the acquisition of location-tracking hardware provider Tile completed just last week in a deal valued at US$205 million. In addition, it was recently added to the S&P/ASX 200 Index (on 7 December) following Santos's acquisition of Oil Search. 

    The app also boasts Randi Zuckerberg - you guessed it, Mark Zuckerberg’s sister - as a non-executive director, who investors believe can help take Life360 to new heights thanks to her experience in the early days of Facebook. 

    The numbers also look promising. Life360 reported underlying revenue growth of 45% year on year to $29.3 million at the end of the September quarter, and currently has US$50.4 million in cash on its balance sheet. That said, it is still loss-making, reporting an underlying EBITDA loss of $3.2 million. 

    Life360 can count the likes of Jun Bei Liu and James Gerrish as fans after they both dubbed it "a phenomenal growth stock" in a recent episode of Buy Hold Sell. Meantime, Wilson Asset Management's Tobias Yao said Life360 was one of WAM Microcap's biggest tech positions. 

    "The valuation is actually undemanding relative to many of its international peers, so we believe the share price still has material upside, driven by continued top-line growth as well as multiple expansion," Yao said. 

    And fun fact - its CEO Chris Hulls became a TikTok sensation, after responding to TikTok hacks on how to circumvent the app to avoid parents' watchful eyes. He now has 294.8K followers on TikTok and "gives back" to young followers and repeatedly offers to disable the app if a video gets 1 million likes. None have yet, luckily, for shareholders. 

    #1: Poseidon Nickel (ASX: POS)

  • Percentage of votes: 1.31%
  • Market cap: $320 million
  • Profitable: No
  • Share price: 10 cents
  • Chart provided by Sharesight

    Poseidon Nickel has taken out the top gong for 2022. The nickel sulphide exploration and development company is giving three previously shuttered Western Australian projects a new lease on life, as demand for nickel (and other battery materials) continues to rise.

    The excitement behind this venture is palpable, and for good reason too: Poseidon is well on its way to restarting its Black Swan Project, while recently reporting increasing mining inventory from its Silver Swan and Golden Swan prospects too. 

    In its recent annual report, Poseidon reported cash reserves of $7.9 million on its balance sheet. However, like many mineral explorers - it is burning cash - posting a loss of $10.9 million in FY21, down from $12.8 million in FY20.

    There is currently a ‘nickel war’ playing out in WA, which has resulted in major M&A activity in the sector over the past few years. Perhaps, for this reason, Poseidon has attracted investment from mining greats such as Andrew “Twiggy” Forrest. Interestingly, just last week, Twiggy sold down his position in Poseidon, but still owns a 10% stake (formerly 12.17%). 

    For Marcus Today’s Marcus Padley, Poseidon is a “safe bet” and could be “a multi-bag” win over the coming years. 

    Meantime, Eden Asset Management's Nicholas Boyd-Mathews believes Poseidon to be an attractive investment opportunity due to the increased demand for high-quality nickel, as well as its experienced management team that has successfully developed similar projects previously. 

    He also says it boasts "high-grade nickel deposits and potential for further significant nickel sulphide discoveries." 

    The wrap-up 

    Interestingly, nine of your 2022 small-cap picks were different from those you selected in 2021. There's an obvious inclination towards battery material producers this year, with four of the 10 stocks operating within the materials (and materials processing) sector. Many of these stocks delivered eye-watering returns in 2021. So can they do it in 2022? Well, we will just have to wait and see. Won't we? 

    Note: An earlier version of this article quoted incorrect return calculations. This information has now been removed. We apologise for this oversight. 

    That's all folks

    We hope you enjoyed this wire on your top-tipped small caps for 2022. If you did, why not give it a 'like'? Stay up to date with my content by hitting the 'follow' button below and you'll be notified every time I post a wire.

    Don't forget to follow my colleague Patrick Poke for an update on your Aussie large-cap picks and Glenn Freeman for your global stocks. 

    Not already a Livewire member? Sign up today to get free access to investment ideas and strategies from Australia’s leading investors. And check out more great content from our 2022 Outlook Series by clicking the link below:

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    Ally Selby
    Content Editor
    Livewire Markets

    Ally Selby is a content editor at Livewire Markets, joining the team at the end of 2020. She loves all things investing, financial literacy and content creation, having previously worked for the likes of Financial Standard, Pedestrian Group, Your...

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