E Best And Worst Small Caps

Railroads are the best scoring small cap industry (GBX, ARII), operator volume and carload pricing continue to support operator profit growth.  UNP & KSU's revenue per carload grew 5% and 5.7% YoY in Q4, respectively. Business services (EXAM, CGX, ARC) also score highly.  Scientific & technical instruments (FLDM, ALOG, PRCP) benefit as global R&D spend increases.  General building materials (HW, NCS) offer growth on construction spending opportunity.

No small cap basics groups score above average.  Where possible go to large cap.  In consumer goods, only small cap textiles (DXYN) are strong scoring.  In financials, buy investment brokers (CLMS), P&C insurers (STFC), and regional banks (TBBK).  In healthcare, the top groups are medical appliances (CYBX, BABY, CYNO, CSII), medical instruments (VASC, HTWR, OSUR), and biotech (SGMO, NLNK, ANIK, CORT, KERX, ANAC). The best baskets in industrial goods are general building materials, and aerospace/defense (ORB).  In services, focus on rails, business services, and restaurants (DAVE, RRGB).  In technology, concentrate on scientific & technical instruments, semi ICs (TQNT, DIOD, PLXT), diversified electronics (IVAC, MEI), and specialized semiconductor (MPWR).


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