E Small Cap Best And Worst Report - December 11, 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 UEIC up 68%, ODFL up 60%, PJC up 59%, MPWR up 58%, and GTIV up 53%.

·       The best small cap sector is utilities.

·       The top small cap industry is specialized semiconductor.

The average small cap score is 56.63, above the four week moving average score of 54.79. The average small cap stock is trading -26.35% below its 52 week high, 0.43% above its 200 dma, and has 7.89 days to cover held short.

The best small cap sector is utilities. Financials, technology, industrial goods, and services score above average. Consumer goods score in line. Healthcare (trade up in market cap) and basic materials score below average.

The top small cap industry is specialized semiconductor (MPWR, QLGC).  The SEMI book-to-bill historically bottoms into fall and accelerates in the first half of the year and semiconductor stocks tend to follow a similar pattern (see chart further below). Management services (HSII, CRAI, HURN) score high. Home healthcare (LHCG, AFAM, GTIV, CHE, AMED) offers upside opportunity as demographics and consolidation offset government reimbursement headwinds. Historically, staffing (CCRN, KFRC, KFY, CDI) has been a top performer at this time of year. Diversified electronics (BELFB, MEI, SIMO) round out our best small cap industry ranking this week.

No small cap basics groups score above average.  In consumer goods, focus on home furnishing (ETH) and auto parts (MTOR, SRI, SMP). In financials, concentrate on regional banks (CFNL, TCBK, TBBK, LKFN), P&C insurers (HMN, STFC, MIG), and investment brokers (GFIG). Home healthcare and medical instruments (CMN, MMSI, ANGO, HBIO, VASC, OSUR, ICUI) score best across healthcare. Aerospace/defense (TASR) and industrial electrical (BGC) are top scoring in industrial goods. The best services industries include management services, staffing, and resorts & casinos (PENN, MCRI).  Specialized semiconductor, diversified electronics, and semiconductor ICs (DIOD, TQNT, OPLK) are top scoring in technology.

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Disclosure: None.

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