Sweet 16

Stock Screen, by Mark Robertson, Managing Partner November 1st, 2015

Best Small Companies On Sale

One of the most powerful lessons we’ve learned from tracking the Forbes Best Small Company list every October is that QUALITY MATTERS. Over the long term, we want out-sized returns from our smaller, more speculative, and faster-growing companies and the best protection against the brutal downside of smaller companies is … quality.

Median Market Forecast. The median forecast — based on the 2400 companies covered at Manifest Investing — is 7.1%. We’ve seen this collective indicator range from low single digits at the end of bull markets to apogees of nearly 20% during the depths of the 2008-2009 Great Recession bear market. With current levels near historical lows, we continue to urge emphasis on quality and financial strength.

Manifest Investing: Best Small Companies (2015)

A funny thing happened on the way to comparing our October preview to the Forbes list of Best Small Companies. Forbes decided to take the year off.

Ken Kavula and I did most of the heavy lifting here. So a few days after launching the list, we can already see who the hottest small companies have been as $100 invested in Mercadolibre (MELI) is now worth $120.36 — up more than 20% over the last three weeks. Ubiquiti Networks (UBNT) checks in at $115.36. UBNT was a recent runner up for a Solomon Select feature and is probably already on many of your radar screens.

But our emphasis should be on who is “on sale” now. Keep in mind that we’ve already taken care of the excellent or nearly-excellent component of the hunt, so all that is left is to sort the tracking dashboard (excerpt shown here) by descending PAR and commence shopping at the top. We’d still urge quality rankings greater than 90 or even 95 when possible. Our shopping list would be thus: Proto Labs (PRLB), last month’s Solomon Select Mesa Labs (MLAB), Balchem (BCPC)and Forward Air (FWRD).

Be prudent. Include enough small companies when shopping. Rinse. Repeat.

Best Small Companies Tracking Dashboard (11/27/2015). Screening results as we search for high-quality faster-growing small companies. Sorted by return forecast (Projected Annual Return, PAR) with minimum growth forecast of 10%. * – not covered in Value Line Investment Survey standard edition. https://www.manifestinvesting.com/dashboards/public/best-small-companies-2015

Mark Robertson

Mark Robertson is founder and managing partner of Manifest Investing, a source for research and portfolio management focusing on strategic long term investors.