E Small Cap Best & Worst Report - May 7, 2015

The best scoring small caps from our weekly reports have outpaced the IWM by a median 622 bps in the following year.

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

The average small cap stock score is 48.94. That is below the average score of 52.67 over the past four weeks. The average small cap stock in our universe is trading -23.85% below its 52 week high, 1.95% above its 200 dma, and has 7.67 days to cover held short Note: short interest has yet to elevate significantly in the most recent sell-off. Typically, actionable lows coincide with average short interest eclipsing 9 to 10 days to cover.

Utilities are the top small cap sector. Consumer goods, technology, and healthcare also score above average. Financials, services, industrials, and basics score below average.

The following chart shows historical small cap sector scores since 2010.

Specialized semiconductor (MPWR, QLGC) is the top small cap industry. Remember, historically the book-to-bill peaks in the second quarter and that typically coincides with a peak in semi performance. Plan accordingly. Application software (ELLI, QLYS, PFPT, LOGM) and business software (NTCT, CSGS, PRFT) are also among our top scoring groups.  Estimates for ongoing IT spending growth in software provide tailwinds. Watch Europe to see how post-QE IT spending evolves and to what extent the strong dollar impacts which companies come out on top in that market. Business services (EXAM, SCOR) and auto parts (MTOR, FSYS) are also solid.

There aren't any above average scoring basics baskets in small cap -- trade up to mid cap where possible.  In consumer, focus on auto parts and textiles (PERY, RCKY, BEBE). The top financials baskets include P&C insurers (MIG, STFC, HMN), credit services (WRLD), and S&Ls (BRKL, WIBC). P&C insurers tend to perform nicely through summer storm season.  In healthcare, concentrate on home healthcare (CHE, AMED, AFAM), specialized health services (USPH, IPCM, AHS), and medical appliances (CNMD, ABMD, OFIX, NXTM, RTIX). Only aerospace/defense (TASR) scores above average across industrial goods.  The best services groups are business services, resorts & casinos (MCRI, PENN), and marketing services (ABTL). In technology, focus on specialized semi, application software, and business software.

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Carol W 5 years ago Contributor's comment

so if this is a seasonality look at small caps..from what date to what date?