Fishing Small-Caps for Tomorrow's Whales

The hard part about fishing for a few good micro-cap stocks is knowing where to drop a line.

Investors avoided the minnows of the market this year, opting instead to go whaling for less economically sensitive mega-caps. The Russell Microcap Index is down close to 9% year to date compared with the S&P 500 which, despite a lot of bellyaching, is still up 5% for the year.

Bob Johnson, co-portfolio manager of the $150 million (SATMX Quote)Satuit Capital Micro Cap fund, says it is easy to get lost in the vast ocean of micro-cap stocks, but the massive quantity of names provides some great opportunities as well. Johnson and co-manager Bob Sullivan screen 4,000 stocks based on sales growth, earnings growth and other quantitative factors. Then they reduce that number to a more manageable 600 names before undertaking a bottom-up stock selection process. ...