E Small Cap Best & Worst Report - August 15, 2014

Since 2010, the average return for our weekly best scoring small caps has outpaced the R2K by an average 742 bps in the following year. The top performers from our report one year ago include JAZZ up 72%, KFY up 52%, UEIC up 50%, and BELFB up 42%.


  • ·        Utilities are top scoring in small cap.
  • ·        Computer peripherals are the best scoring small cap industry.

The average small cap score across our universe is 51.90 this week, above the four week moving average score of 50.39. The average small cap stock is trading -27.15% below its 52 week high, -4.68% below its 200 dma, and has 8.43 days to cover held short.

Utilities are the top scoring small cap sector this week. Financials, industrial goods, and technology also score above average. Consumer goods, basic materials, and healthcare stocks score in line with the small cap average score. Services stocks score below average.

Computer peripherals (PLNR, ALOT) are the highest scoring industry across our small cap universe this week. Railroad (ARII, GBX) volume was 6.3% higher in July than a year ago while intermodal volume was 5.5% higher than last year (highest July intermodal volume on record). Total U.S. rail traffic is 4.7% higher year-to-date than in 2013, offering support for railcar suppliers. Specialized semi (MPWR, QLGC) and semi equipment & materials (OSIS, KLIC, ATMI) are also among our top small cap industries; however, SEMI book-to-bill typically pauses until later in the year and the Semiconductor ETF (XSD) has posted gains in just 3 of the past 8 periods beginning August and ending October 31st.  Management services (CRAI, NCI) are also among our top scoring small cap industries.

In small cap basics, gold (SA, NG) is the only industry that scores above average. In consumer, textiles (PERY, OXM) offer upside heading into strengthening seasonal demand for clothing. Every small cap in financials industry scores at or above average this week. Concentrate on P&C insurers (HMN, UFCS), savings & loans (BRKL, PROV), and regional banks (CFNL, SNBC). In healthcare, buy home healthcare (GTIV, CHE, AMED), specialized health services (AHS, PRSC, HWAY), and medical appliances & equipment (BABY, SPNC, RTIX, CRY).  No small cap industrial goods baskets score above average this week. In services, focus on railroads, management services, and restaurants (SONC, BJRI). The top scoring technology groups include computer peripherals, specialized semiconductor, and semi equipment & materials.

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