E Small Cap Best And Worst Report - August 7, 2014

Since 2010, the average return for our weekly best scoring small caps has outpaced the R2K by an average 757 bps in the following year. The top performers from our report one year ago include DYAX up 129%, JAZZ up 71%, UEIC up 57%, and KFY up 49%,.

·        Utilities are the top scoring small cap sector.

·        The best small cap industry is semi ICs.

The average small cap stock score is 49.39, below the four week moving average score of 50.50. The average small cap stock is trading -28.28% below its 52 week high (getting interesting), -6.29% below its 200 dma (needs to bounce to remain within our preferred -5% to +5% band), and has 8.43 days to cover held short.

Utilities, technology, and financials score above average. Consumer, industrials, and healthcare score in line with the average small cap universe score. Services and basic materials score below average.

Semi ICs (RFMD, OPLK, TQNT, PLXT) and semi equipment (OSIS, KLIC, ATMI) score best across small cap; however, semi's lose seasonal luster until book-to-bill re-accelerates into winter.  Stay stock specific. Business software (MSTR, TSYS, NTCT) is strong scoring. Management services (CRAI) and computer peripherals (PLNR) also offer upside.

 

Across small cap basic materials, only gold (SA, NG) scores above average. In consumer goods, focus on processed & packaged goods (MGPI, DMND) and textiles (PERY, OXM). The top financials industries are P&C insurers (HMN, UFCS), savings & loans (BRKL, OCFC), and regional banks  (CFNL, SNBC). The best in healthcare are home healthcare (CHE, GTIV) and medical appliances (BABY, RTIX, ARTC, OFIX). The top industrial goods basket is aerospace/defense (LMIA, AIR). In services, concentrate on management services, rails (ARII, GBX), and business services (EXAM, FURX). Semi ICs, semi equipment, and business software score highest in technology.

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