E Small Cap Best & Worst Report - November 6, 2014

Since 2010, the average return for our weekly best scoring small caps has outpaced the R2K by a median 759 bps over the following year. The best performers from one year ago are HA up 111%, GTIV up 79%, MEI up 67%, ODFL up 57%, and ARII up 55%.

  •  The top scoring small cap sector is utilities.
  •  The best small cap industry is staffing.

The average small cap score is 56.11, above the four week moving average score of 51.12. The average small cap stock is trading -26.8% below its 52 week high, -0.79% below its 200 dma, and has 9.05 days to cover held short.

Utilities, industrial goods, financials, technology, and consumer goods score above average.  Services score in line. Healthcare and basics score below average.

The following table breaks out seasonality by major market ETF for the period beginning November and ending January 31st.

Over the past 10 years, the Russell 2000 (IWM) has posted gains eight times for a median return of 7.2%.

The top scoring small cap industry is staffing & outsourcing (KFRC, CCRN, CDI). Industry demand historically heads higher into year end. The ASA weekly staffing index is 4.22% higher year-over-year.  Specialized semiconductor (MPWR, QLGC) and diversified electronics (BELFB, MEI) demand benefits from increasingly complex industrial machinery. Home healthcare (LHCG, AFAM) consolidation supports valuation, while demographics offset reimbursement risk. Management services (CRAI, NCI, HURN) rounds out this week's best industries list.

No small cap basics groups score above average across small cap this week. In consumer goods, buy home furnishings (ETH, SCSS) and auto parts (SRI, SMP). The top financials groups are P&C insurers (UFCS, STFC, MIG, GLRE), regional banks (CFNL, TCBK, LKFN), and investment brokers (GFIG, CLMS). In healthcare, concentrate on home healthcare and medical instruments (MMSI, CMN, ANGO, VASC, HBIO, ATRI). Aerospace/defense (TASR, AVAV) and industrial electrical equipment (DAKT, BGC) score highest across industrial goods. The top services baskets include staffing, management services, and resorts & casinos (PENN). Specialized semi, diversified electronics, and semi ICs (TQNT, OPLK, RFMD) score best across technology.

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Disclosure: None.

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