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 59%, MEI up 55%, and ODFL up 54%.

·       The best small cap sector is utilities.

·       The top scoring small cap industry is staffing.

The average small cap score is 54.59, above the four week moving average score of 53.22. The average small cap is trading -27.26% below its 52 week high, 0.86% above its 200 dma, and has 9.05 days to cover held short.

Utilities score best across small cap.  Industrial goods, financials, consumer goods, and technology also score above average. Services score in line. Healthcare and basic materials score below average.

The following chart shows historical score by sector since 2010.

The best small cap industry is staffing & outsourcing (KFRC, CCRN, CDI). Demand historically peaks through the holidays. Specialized semiconductor (MPWR, QLGC) also scores highly. Regional banks (CFNL, TCBK, LKFN) benefit from commercial and industrial loan growth and emerging consumer loan growth.  In September, commercial and industrial loans at commercial banks improved to $1,732.79 billion, up from $1,676.2 billion in May.

Management services (HURN, CRAI) offer upside. Resorts and casinos (MCRI, PENN) score strongly. Hotel industry occupancy increased 5.8% year-over-year in the most recent week, lifting RevPAR 11.7% to $70.64. According to STR, occupancy and RevPAR grew 3.9% and 9.5% in September versus a year ago, respectively.

No small cap basics industries score above average. Home furnishings (ETH, SCSS), auto parts (SRI,SMP), and processed & packaged goods (DMND, BDBD) are attractive in consumer goods.  Regional banks, investment brokers (GFIG, KCG), and P&C insurers (STFC, MIG) score best in financials. Home healthcare (AFAM, CHE) and medical instruments (MMSI, CMN, VASC, HBIO, ANGO, ATRI, OSUR) are best across healthcare. Industrial electrical equipment (DAKT) and aerospace/defense (TASR, ORB) should be the focus in industrial goods. The top services groups are staffing, management services, and resorts and casinos. Specialized semiconductor, diversified electronics (BELFB, MEI), and semi ICs (OVTI, OPLK) are the top technology industries.