This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

10 Small-Cap Stocks Safe for Skittish Investors (Udate1)

(Story updated to add that Copart recently announced a 2-for-1 stock split.)

BOSTON ( TheStreet) -- The small-cap stock sector may be one of the most fertile fields to plow this spring as the economy heats up.

Although the S&P SmallCap 600 Growth Index is running right on par with the S&P 500's 12% gain this year, it's up 35% since early October when the markets' recovery began. According to S&P Capital IQ chief equity strategist Sam Stovall, small-cap stocks historically have, on average, risen 47% in the 12 months following a market bottom. That means it may not be too late to go small-cap-stock shopping.

The downside to investing in the small-cap sector is that it can be a rocky patch during periods of economic uncertainty, and its stocks can be highly volatile.

In light of that, S&P Capital IQ analyst Jim Corridore screened a large number of small-cap growth mutual funds to find those with the lowest beta, a measure of a stock's or a fund's performance in relation to the overall market, and is indicative of their volatility.

He found three funds that have very low volatility, coming close to a beta of 1, which means their portfolio moves in step with the broader market. They also get high ratings from S&P Capital IQ for performance and management competence.

They are the $540 million Loomis Sayles Small Cap Growth Retail Fund (LCGRX), up 11% this year; the $262 million Nicholas Limited Edition I Fund (NCLEX), up 12%; and the $533 million Wasatch Core Growth Fund (WGROX), up 11%.

I then reviewed the three funds' portfolios to identify some of their best-performing stocks, and they should be quality picks as well, since they, in effect, have gone through two independent screens, that of their fund managers and then, indirectly, Standard & Poor's.

As can be expected in the small-cap sector, these funds have some quirky holdings. For example, the Loomis Sayles fund's top pick is a software firm that sells a program that does all the back-office work for car dealers. The top three holdings of the Nicholas fund include two women's products retailers. The Wasatch fund's top selection is an auctioneer of totaled cars and recovered stolen vehicles.

Here are 10 of the top stock picks of three low-volatility, highly rated small-cap growth funds, ranked in inverse order of their number of "buy" ratings:
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CPRT $34.80 2.41%
LTM $72.07 -0.04%
ULTA $168.04 1.38%
AAPL $110.78 0.36%
FB $93.69 1.80%


Chart of I:DJI
DOW 16,776.43 +304.06 1.85%
S&P 500 1,987.05 +35.69 1.83%
NASDAQ 4,781.2640 +73.4890 1.56%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs