Scouring The Stock Screens For A Small Cap Gem

On a percentage basis, we target to allocate about 10% of our stock portfolio on small-cap stocks. Our definition of a small cap is stocks with a market capitalization below $500M. While these stocks are associated with a higher risk factor than larger cap stocks, the returns can also be higher. Stocks with a market cap below $100M or with stock price below $1 are prone to even more risk and can dent investor confidence should the stock take a clobbering.

Our portfolio currently lacks stocks that qualify as a small-cap though we do own a few whose market cap ranges between $500M and $5B. The plan is to add a small cap with a market capitalization below $100M initially with about 5% of the total portfolio followed by a second small cap with a market capitalization above $100M with another 5% of the total portfolio.

Analysis of small-caps undertaken by analysts and the media are generally hard to come by, thus leaving the onus on the investor to evaluate the risks involved. Our effort uses stock screening tools to identify stocks to potentially invest in. These are the stocks that we have narrowed down to:























StockPrice*Market CapRevenue*Comments
Atherogenics (AGIX)1.768M46MPerformance dependent largely on diabetes drug phase III study results due early next year.
Qualstar Corporation (QBAK)3.7547M21MManufacturer of magnetic tape libraries. Grew revenue about 20% last quarter after years of stagnating results as a result of the new XLS product line aimed at the high end of the tape library market.
Asure Software, Inc. (ASUR)1.2832M40MFormerly Forgent networks which made a business out of monetizing IP. Now transforming into a SaaS workforce management business.
Dry Clean USA Inc. (DCU)1.9914M24MIndustrial laundry product distributor. Stable business with over 4% yield. But growth may be hard to come by.
Technology Research Corporation (TRCI)3.722M38MElectrical Safety Products Manufacturer. Growth is dependent on military orders and the outcome of a patent infringement lawsuit against Shanghai ELE regarding the FireShield® technology.



  • *Price as of end of the day Thursday
  • **Projected Revenue EOY 2007

Over the years, our efforts to tap into this market niche have not borne fruit. A post that looks at our history with small cap stocks will follow with a focus on learning how to best invest in them.

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