Small Caps on Fire

Since the election of Trump is November small caps have led the market by a wide margin with a rally has been broad base judging by the leading performance of the value line arithmetic index, which is a more equal weighted index. If the incoming administrations stays true to its campaign platform we would expect small caps to continue this out performance. Corporate tax cuts, reductions in administrative and regulatory burdens and An uptick inflation all play to the advantages of small-caps , when combined with a focus on domestic oriented businesses that lead job creation, should power continued alpha.

Our top performing ideas in 2016 were lead by healthcare and biotech companies with three top picks. REX was out best call , starting the year trading at book value and soaring over 83% as oil prices turned around , powered by better than expected earnings and increasing Institutional ownership, Rex has rewarded our clients with a 700% + return since we initiated coverage in 2010.during this period  Singular has been the sole , consistent research coverage due to lack of banking deals to entice street coverage. Another case of consistent stable earnings growth and superior returns is embodied by ACU + 47% and our first initiation, over 11years ago, providing a reward of nearly 300% since we initiated coverage.

A trio of health care related issues powered our core of our best calls, led by IRIX, with its laser technology based treatment for glaucoma, up +56% followed by IGTX +50% with its novel proprietary oral drug delivery technologies, and newcomer AMRS + 49%,  with this proprietary bioscience platform that cost effectively converts plant sugars into difficult to source materials in fragrance cosmetics and nutrition. We feel these three stocks could be in the early stages of exceptional multi-year outsized returns evidenced by their leadership and niche positions and lack of research coverage by the street.  Filling out our top performers are SNC a unique property-casualty insurance with innovative products  and KL IC, a semiconductor equipment manufacturing in the early stage of a fundamental turnaround posting 2016 returns respectively 36 and 35%.

We are encouraged by the signs of animal spirits re-emerging for 2017 and will continue searching high and low for these Forgotten gems that don’t need Wall Street some money. Thank you and stay tuned!

2016 Best Calls
 

REX 82.63%
IRIX 56.22%
IGXT 50.00%
AMRS 48.97%
ACU 46.85%
KLIC 36.67%
SNC 33.14%