E Small Cap Report


 The following chart shows average weekly small cap scores by sector since 2010.

The best scoring small cap industry is trucking (SAIA, MRTN). European commercial and passenger car registrations have turned positive and support auto parts (MTOR, SMP) sales. Business services (EXAM, KONG) are strong. Independent oil & gas  (KWK, GDP, PVA) offers upside opportunity; however, historically managers have been rewarded for trimming into strength during May.


In small cap basic materials, concentrate on independent oil & gas, drillers (WTI), and industrial metals & minerals (ACI). In consumer goods, buy auto parts, processed & packaged goods (DMND), and textiles (DXYN, PERY). In financials, P&C insurers (STFC) and investment brokers (CLMS) score best. P&C stocks typically provide upside through the summer storm season. Across healthcare, only specialized health services (HWAY) scores above average -- stay stock specific, or trade up in market cap instead. The top industrial goods groups include heavy construction (AEGN, MTRX, GVA), aerospace/defense (ORB, AVAV), and general building materials (ACO). Summer air show order season offers support for aerospace contractors. Construction spending growth tied to improving vacancy rates in key markets supports building materials.  In services, buy truckers, business services, and rails (GBX). The top technology industries are semi ICs (DIOD), semi equipment (ATMI), and business software (TSYS).  However, managers should remember that SEMI's book-to-bill historically peaks in the second quarter.

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