Three small cap picks researcher Equity Story likes for May

Each month independent research house Equity Story outlines three ASX small caps that look promising.

Before we look forward to May, how did Equity Story’s April picks perform?

Last month the experts came up with Champion Iron (ASX:CIA), Praemium (ASX:PPS) and Freedom Foods (ASX:FNP).

Champion Iron gained 20.9 per cent between the date of our last column (April 3) and the high reached during the month up until market close (April 30).

Praemium moved ahead 26.6 per cent and Freedom Foods put on 15.1 per cent over the period.

Here are the top picks for May from the Investment Team at Equity Story:

Technology One (TNE)

Sector: Software & Services

Profile: Technology One engages in the development, marketing, sales, implementation and support of fully integrated enterprise business software solutions. It operates through five segments: Sales & Marketing, Consulting, Research & Development, Cloud and Corporate.

Why Equity Story likes it:

Fundamentals: The company reiterated in its most recent announcement that most troubles are behind it and it’s in position to return to good growth. With the 1H18 results due in May, we are backing the management to deliver on its promises and set out a path for future growth. One of the premier IT stocks with a long successful track record.

Technicals: The chart hasn’t been doing much for the past 12 months, essentially moving sideways during this period. We believe that the recent lows have formed a base for what is hopefully a new uptrend driven by strong fundamentals. This week has seen the chart poke it’s head above the 20x day moving average on a weekly chart, triggering our top-secret Equity Story “Buy Signal”!

Macquarie Group (MQG)

Sector: Diversified Financials

Profile: Macquarie Group Ltd. engages in the provision of banking, financial, advisory, investment and funds management services. Headquartered in Sydney, Macquarie is the largest Australian investment bank and the top ranked mergers and acquisitions advisor in Australia.

Why Equity Story likes it:

Fundamentals: Hasn’t put a foot wrong for some time although markets have been favorable for outperformance. The last few years MQG has been transforming itself into a more predictable, less riskier growth story and we are lapping it up as we can see further growth ahead. 1H18 results in May should deliver more good news and set the company up for another good year.

Technicals: A beautiful looking chart in a strong uptrend since September last year. A lot of money to be made trading a chart like this. If it touches the 20x day moving average (weekly chart) and turns up, it goes higher! If it touches the 40x day moving average and turns up, it goes higher! If it breaks to 40x day moving average and turns up, it goes higher! We are looking for the continued growth of the business to take the reigns and continue the move above the recent all-time highs.

Visioneering Technology (VTI)

Sector: Health Care Equipment & Services

Profile: Visioneering Technologies is a medical device company which engages in the design, manufacture, sale and distribution of contact lenses. It focuses on the treatment of presbyopia in adults and myopia correction in children.

Why Equity Story likes it:

Fundamentals: This is a microcap stock with unique, niche contact lenses that are slowly gaining sales traction in the US and now going to be rolled out through the world. If the company successfully executes its strategy and capture a meaningful market share this stock could outperform significantly. Early growth story so high risk but high reward.

Technicals: Technically speaking, by no means a strong looking chart and a hard one to gauge due to its low trading volume. We will be relying more on the fundamentals to drive this one. If the we see a sustained move above the 20x day moving average on a weekly chart there is plenty of blue sky between here and the recent all-time highs.

For the past five years the investment team at Equity Story has provided independent online trading advice to thousands of investors, providing them with direct buy and sell recommendations. To date, clients have received 400+ closed recommendations.

They are also the research team behind boutique wholesale fund manager – Edison Capital.

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