E Small Cap Best & Worst Report - October 24, 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 63%, GTIV up 62%, and ARII up 58%.

  • Utilities are the top scoring small cap sector.
  • The best scoring small cap industry is P&C insurance.

The average small cap score is 51.12 this week, above its four week moving average score of 48.77. The average small cap stock is trading -30.5% below its 52 week high, -6.38% below its 200 dma, and has 10.5 days to cover held short.

Utilities, industrial goods, consumer goods, and financials score above the small cap universe average score. Technology, services, and healthcare score in line. Basics score below average.

 

P&C insurers (UFCS, STFC) offer upside opportunity as underwriting growth continues to benefit from rising construction activity and employment. Diversified electronics (MEI, BELFB) are attractive. Consolidation and demographics offset reimbursement headwinds for home healthcare (AFAM, LHCG). Staffing (CCRN, KFRC) demand historically accelerates through the holidays. According to ASA's weekly staffing index, staffing employment is up 3.25% year-over-year in the most recent week.

Source ASA Staffing Index

No small cap basics groups score above average this week -- trade up in market cap. In consumer goods, buy home furnishings (ETH,SCSS) and auto parts (SRI, SMP). The top financials groups are P&C insurers, investment brokers, and regional banks (CFNL, TBBK, TCBK). Home healthcare and medical instruments (CMN, VASC, OSUR) are best in healthcare. Industrial electrical equipment (DAKT,BGC), aerospace/defense (ORB, AVAV), and heavy construction (GVA) can be bought in small cap. The top services groups are staffing, business services (FURX, ARC), and trucking (SAIA). In technology, focus on diversified electronics, semi equipment (ATMI, OSIS), and computer peripherals (PLNR).

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