The 10 most-tipped small-cap stocks for 2023

Volatility has been the name of the game the past year, and it only increased the further one goes down the market cap spectrum. The Small Ordinaries index was down 21% over the past year, while the ASX 200 has suffered a third of that at -7%. 

Maybe for this reason, and the fact there are about 2000 small cap companies on the ASX to choose from, only one company has retained its place in the Top 10 most-tipped small caps for 2022 (take a bow, Calix). Even last year's top performer, Brainchip (ASX: BRN), failed to secure a guernsey.   

It's out with the old and in with the new. And who can blame you? Last year's picks copped twice the damage of the broader market. The only similarity this year's picks share with last year's is the sectors they occupy - mining (7) and technology (3). 

This all paints a fairly sobering picture of small-cap investing. But there's a silver lining. While volatility is colloquially associated with losses, it equally applies to positive returns. So when the market takes off, there's a fair chance that the greatest gains will be made at the smaller end of town. 

Here's hoping the following small-cap companies, as voted on by over 3,000 Livewire readers, reverse last year's bloodbath. 

Please note... By publishing this list, we share 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. Past performance is not a reliable indicator of future return. For the sake of this article, we define a small cap stock as anything outside the ASX100.  

Small caps at a glance

• Calix (ASX: CXL)  was the only stock to retain its spot in the Top 10
• Average market cap among the Top 10 is $1.51B
• Average 12-month return of -32.73%
• Arafura Rare Earths (ASX: ARU) is the best 12-month performer at 97.78%
• 7 miners, 3 tech stocks
• Two of the 10 stocks voted for overall (i.e including large caps)
• 4 stocks enjoyed positive returns over the past 12 months

#10. Calix (ASX: CLX)

1-year performance CLX v S&P/ASX Small Ordinaries (XSO)

The market may have hit the brakes, but Calix's corporate activity certainly hasn't.  

It recently entered into a joint venture with Pilbara Minerals for a "mid-stream" demonstration plant at the Pilgangoora Project, which has "the aim of producing lithium salts via an innovative midstream “value added” refining process utilising Calix’s patented calcination technology, as well as for the potential commercialisation of the process."

Pilbara Minerals will take a 55% stake, with Calix taking the balance.

Pilbaba Minerals CEO Dale Henderson said of the deal: "The Mid-stream project has the potential to be a game changer for our industry. If successful, we will be able to deliver a superior chemical intermediary product to market compared to spodumene concentrate."

It's also developed technology that cuts CO2 emissions in cement and lime manufacturing by 90%.

Despite all this, the stock has lost almost a third of its value this past year - part and parcel of being a small-cap tech stock. 

But as the old saying goes, a company and its stock are not the same things. Has Calix been unfairly oversold?

The trading history of Billionaire investor and Thorney Technologies chair Alex Waislitz certainly suggests so. He recently ploughed another $1 million into Thorney Technologies Ltd (ASX: TEK), in which Calix is a top holding. 

#9. Chalice Mining (ASX: CHN)

1-year performance CHN v S&P/ASX Small Ordinaries (XSO)

CHN is a specialist mineral explorer and developer, focusing on platinum group elements (PGE), nickel, copper, cobalt and gold across four projects in Western Australia. 

Livewire regular Barry FitzGerald last month penned an excellent piece discussing CHN's flagship Julimar nickel-copper-PGE project. 

"Julimar’s magic mix of metals and its easy access to infrastructure mean it could potentially be in production by about 2028, or eight years after the discovery hole, potentially with the help of a strategic partner," he wrote. 

"A delay measured in months, not years, in the release of its scoping study doesn’t change that eight years discovery-to-mine potential. What the delay means is there is the potential for higher metal recoveries than first thought."

#8. Sayona Mining (ASX: SYA) (tie with Renascor Resources & Pointerra)

1-year performance SYA v S&P/ASX Small Ordinaries (XSO)

Lithium producer Sayona Mining was the third-best-performing mining stock on the ASX in 2022, entering the ASX 200 for the first time in September when the stock skyrocketed almost 190%, to $0.36 from its low of $0.12 in June. Nonetheless, the price has been cut in half since then. 

The company is on target to restart production at its flagship North American Lithium (NAL) operation in Q1, with procurement, permitting and construction activities ongoing. 

 “Our planned expansion at NAL, together with the growth of our northern lithium hub centred on the Moblan Lithium Project, have positioned Sayona well for 2023 as we work to cement Québec’s position as North America’s key supplier of essential battery minerals for the clean energy revolution," Sayona’s Managing Director Brett Lynch said in late December. 

#7. Renascor Resources (ASX: RNU) (tie with Sayona Mining & Pointerra)

1-year performance RNU v S&P/ASX Small Ordinaries (XSO)

Mineral developer Renascor Resources's is another company chasing the electrification megatrend. Its current activities are focused on its 100%-owned Siviour Battery Anode Materials Project and Carnding Gold Project, both in South Australia.

To that end, it last month kicked off a $70 million raise to develop its Siviour battery anode material (BAM) project. 

 “Renascor’s ambition is to become a reliable supplier of 100 per cent Australian-made purified spherical graphite for lithium-ion battery anode makers worldwide,” said Managing Director David Christensen.

“The funds raised via this placement will accelerate our development timeline by bringing forward the commencement of construction of the Siviour mine and concentrator."

#6. Pointerra (ASX: 3DP) (tie with Sayona Mining & Renascor Resources)

1-year performance 3DP v S&P/ASX Small Ordinaries (XSO)

Pointerra leverages cloud and AI to provide digital asset management products across sectors, including civil infrastructure, mining, oil & gas, architecture, engineering & construction, and government agencies at all levels.

Between March 2020 and February 2021, Pointerra's share price went to the moon, returning almost 1900%. Unfortunately, much of that gain has been pared back as tech stocks fell out of favour amid rising inflation, with 3DP returning -47.95% over the past year. 

Still, this performance should be taken in context; the stock is about 350% up on its 2020 low-water mark. 

#5. Core Lithium (ASX: CXO)

1-year performance CXO v S&P/ASX Small Ordinaries (XSO)

Owning a stock like Core Lithium isn't for the faint of heart. It returned a whopping 72% in 2022, but it wasn't a smooth ride. It went from 59 cents up to $1.60, down to 85 cents, back up to $1.86, then back down to $1.02 by year's end. 

These wild price swings walked in lockstep with the lithium price, which doubled last year (and 10x since early 2021). What will the lithium price do in 2023? Morgan Stanley expects a correction in 2023 as "decelerating demand growth will ease current market tightness."

Markets have also bought into the company's Finniss Lithium Project, which has been given Major Project Status (MPS) by the Federal Government, and is slated to begin mining lithium and turning it into lithium concentrate this year. 

#4. Sandfire Resources (ASX: SFR)

1-year performance SFR v S&P/ASX Small Ordinaries (XSO)

Sandfire's share price had a great time in November, when it soared 45% courtesy of an 11% kick in the copper price and expectations of China reopening.  

As the copper price levelled off, so too did the Sandfire share price. 

The balance sheet has had a healthy cash injection of late, in the form of a $200m entitlement. This saw Macquarie upgrade the stock to Outperform. 

#3. Liontown Resources (ASX: LTR) 

1-year performance LTR v S&P/ASX Small Ordinaries (XSO)

Liontown's chart could be laid on top of Core Lithium's, such is the relationship these companies have with the lithium price at any given time. 

It enjoyed a 150% return between June and November last year, but these gains were short-lived. It's unwound most of that and is down -31.77% in the last month alone. 

This is despite Liontown and Zenith Energy last month executing a binding Power Purchase Agreement for the supply of electricity to the Kathleen Valley Lithium Project in Western Australia for 15 years.

"Zenith Energy’s commitment to deliver a high-capacity hybrid power solution includes incentives to produce renewable power over thermal power and, together with a renewable energy guarantee, sets us up to meet our renewable energy target of 60 per cent at startup. 

"Securing the $25 million guarantee from Export Finance Australia assists to reinforce Liontown’s position as a new globally significant producer and exporter of lithium integral to the transition to a low-carbon future.”

#2. Megaport Limited (ASX: MP1)

1-year performance MP1 v S&P/ASX Small Ordinaries (XSO)

Megaport had a torrid 12 months, losing almost 66% over the past year as the market came down hard on unprofitable tech.  

"Clearly, the last 12 months have been very rocky for this company," says Jun Bei Liu from Tribeca Investment Partners.

"To start with, it was a very expensive business. It's not a cashflow profitable business. It's getting very close to it, but it is a very rapid growth business and that has really, really hurt its share price because it was too expensive.

Tribeca still hold Megaport, "[but] we still think it's a great company on the long-term view. Just for the time being, it probably will stay where it is, simply because it is on an expensive valuation."

#1. Arafura Rare Earths (ASX: ARU)

1-year performance ARU v S&P/ASX Small Ordinaries (XSO)

Top spot this year goes to Arafura Rare Earths, with 1.49% of the total vote. 

Not only is it this year's winner on votes - its 12-month return is the best in the basket at 97.78%. 

ARU was also one of Bell Potter's top stock picks for 2023, so our readers are in good company. 

ARU is also in a great cash position, having just finalised a $141 million equity raise.  

The full list

Did your call make the Top 10 or were you surprised by the list?