America’s Best Small Companies 2014

America’s Best Small Companies 2014

America's Best Small Companies

During 1980s and 1990s the large cap companies used to trounce the smaller cap companies in the stock market. For example, S&P 500 which falls under small cap category achieved only 18% in the two decades while a large cap company, Russell, was constantly achieving 14% per year every year. The reason for this was that the investors invested heavily on the brand names and blue chip companies during the 1980s and 1990s. But the tables turned with the financial crisis and internet bubble bursting in just one decade. From 2000 to 2010, S&P gained almost nothing while the Russell rose 79%. But in the last one year, S&P have outplayed Russell by 14 percentage points. This in one of the way shows the emergence of the small cap companies in the stock market.

Small cap companies provide investors with a lot more opportunities than the multi – billion dollar established giants of the stock market. The Forbes identified top 100 such companies of each year based on return on equity, sales growth and earnings growth over the past one year, as well as the past five years. The companies range from the aerospace sector to home building sector to the retail sector.

The list released by Forbes this year is being dominated by the technology and health care firms, but the top spot is being reserved for the company that was able to capitalize on the franking boom. The Frederick, Md.-based firm, U.S. Silica Holdings, has got the number one rank this year. Its task is to provide energy companies with the sand used in the hydraulic fracturing process to extract oil and gas from the shale fields. CEO Bryan Shinn expects the demand for “frac” to double or even triple in the coming few years. Its stock is also in a healthy position currently. Even after being down by 40% in the past month, it was able to gain over 200% in the last two years.

Automobile companies are also not far behind in the list. The Northville, Mich. Company, Gentherm, a maker of heating and cooling systems for the global automakers has grabbed the second position in the list. Its sales projections are at 811 $million this year, up 61 $million from 2009. This can be seen as a significant increase in the past five years.

Moreover, there are 30+ tech companies who have managed to be in the top 100 list lead by The Newtown, Pa.-based company EPAM systems, which is ranked third overall. Its main base is in Eastern Europe, and it specializes in outsourcing software engineering and IT services. It has focused itself on the acquisitions to achieve growth with the latest targets being GGA Software in June and China-based Joint Technology Development in April. It is also expected to get a contract in 2015 to develop a system that will serve as an audit trail to help regulators track trading activity. The special feature about EPAM was that it was able to triple its stock value in just 2 years after IPO in 2012.

The top performers of the last year include Collectors UniverseMyriad Genetics and John B Sanfilippo & Son, with each returning at least 60% to investors. Another company to have made his presence felt is last year’s top-ranked company, Questcor Pharmaceuticals specializing in the treatment of multiple sclerosis using a drug called Acthar. It was acquired by Mallinckrodt Pharmaceuticals in August for $93.60 a share.

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