Having some exposure to the small side of the market can be a good thing for a balanced portfolio, if your risk tolerance allows.
That's because the potential returns on offer from small-cap ASX stocks are often superior to what you would find elsewhere on the market.
With that in mind, let's look at one small cap that Bell Potter is tipping to more than double in value. Here's what the broker is recommending:
Which small-cap ASX stock?
The small cap that has caught the eye of Bell Potter is Alpha HPA Ltd (ASX: A4N).
It is the owner of the First Facility in Queensland, which is aiming to supply high-purity aluminium-based products to the semiconductor, lithium-ion battery, and light emitting diode (LED) manufacturing sectors.
Bell Potter highlights that the project's proprietary technology is expected to disrupt incumbent HPA production through delivering ultra-high purity products with significantly lower unit costs.
Following a site visit, the broker is feeling very positive about the small-cap ASX stock's outlook. It said:
A4N hosted a site visit and management briefings at its HPA First project in Gladstone yesterday, attended by around a dozen investors and sell-side analysts. The visit highlighted construction progress at Stage 2 and an update on engagement with customers. With reference to the January 2026 estimates, Stage 2 development is on budget and on schedule for wet commissioning in mid-2027 and first production in 2H 2027. A4N management spoke confidently about product demand and the potential for future expansions at Gladstone. They expect to meet the conditions for debt draw-down by the end of 2026.
Bell Potter also points out that the company is well-placed to benefit from increasing demand for aluminium compounds in the booming data centre market. It adds:
Around 70-80% of A4N's current customer engagement is with the semiconductor sector which is seeing unprecedented demand from AI data centre expansions. A4N's high purity aluminium compounds have purity and morphology which unlock greater manufacturing and computational efficiency compared with incumbent suppliers and materials (high purity silica). Key applications are for Chemical Mechanical Planarization used in semiconductor manufacturing and for thermal management (thermal fillers). A4N also has ongoing engagement for direct lithium extraction and battery anode coating use-cases where its products are again driving higher value in use.
Big potential returns
According to the note, the broker has retained its speculative buy rating on the small-cap ASX stock with an unchanged price target of $1.50.
Based on its current share price of 62.5 cents, this implies potential upside of 140% over the next 12 months.
Commenting on its buy rating, Bell Potter said:
A4N's HPA First process has a competitive advantage in the production of aluminabased thermal interface fillers and CMP abrasives for the semiconductor sector. A Stage 1 facility commissioned in 2022 has technically derisked the process and is providing product for market outreach and customer qualification. Over 2026, we expect A4N to sign further offtake Letters of Intent and progress to sales contracts.
The post Why Bell Potter says this small-cap ASX stock could rise 140% appeared first on The Motley Fool Australia.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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