Stock Screens 

Nine high-quality small-cap plays

Nine high-quality small-cap plays

A key issue when using a stock screen to try to identify 'quality' small caps, is that a low level of scrutiny of this part of the market by brokers and investors makes it easier for companies to present numbers that make them look like 'quality' plays, when the reality may be less favourable. One stock in particular from last year’s screen exemplifies this issue, and my colleague Alex Newman (covering for me while I was on paternity leave last summer) highlighted his concern about the share in question when writing up the results of last year’s high-quality small-cap screen. The share in question was Utilitywise and the problem, to quote Alex, was that it looked:  “a classic Aim stock for the wrong reasons…we have previously flagged the [poor] cash conversion rate.”

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