E Small Cap Best & Worst Report - February 12, 2015

The best scoring small caps from our weekly reports have outpaced the IWM by a median 671 bps in the following year.

  • The top small cap sector is utilities.
  • The best small cap industry is specialized semiconductors.

The average small cap score is 56.88, which is above the four week moving average score of 54.93. The average small cap stock is trading -25.53% below its 52 week high, 2.09% above its 200 dma, and has 7.25 days to cover held short.

Utilities, consumer goods, technology, services, and financials score best and can be overweight in small cap portfolios. Healthcare, industrial goods, and basics score below average.

The best small cap industry is specialized semiconductor (QLGC, MPWR). Restaurants (RRGB, BJRI, DAVE) benefit from rising foot traffic and same store sales. Semi ICs (DIOD, TQNT, PLXT, RFMD, OPLK) offer upside alongside the seasonal improvement in book-to-bill and the ongoing electrification of 'everything'. Demand for scientific & technical instruments (AFFX, ALOG, NEWP, FLDM, IIVI) benefits from additional spending tied to the administration's push to fund personalized medicine research. Business services (EXAM, FURX, ARC) are also among the best scoring industries.

None of the small cap basics baskets score above average. Home furnishings (SCSS), textiles (PERY, BEBE, DXYN), and auto parts (SRI, FSYS, MTOR) are top scoring in consumer goods. P&C insurers (STFC, MIG), investment brokers (GFIG), and S&Ls (PROV, BRKL, OCFC, NWBI) can be bought in financials. In healthcare, focus on specialized health (BEAT, HWAY, PRSC), medical instruments (HBIO, UTMD, IART, HTWR), and home healthcare (AFAM, CHE).  Aerospace/defense (LMIA, ORB) and general building materials (HW, USLM) are top scoring in industrials. In services, concentrate on restaurants, business services, and resorts & casinos (PENN, BYD). Specialized semi, semi ICs, and scientific & technical instruments score best across technology.

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