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Small-Cap Names That Are Big With Medalist Funds

Among the thousands of small-company stocks, these are the most popular among analyst-recommended small-cap funds.

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In last week's Five-Star Investor, we took a look at stocks that were widely held among medalist large-cap funds. The idea was to identify stocks that a number of quality funds were banking on and to provide a few ideas that some readers may not have considered.

This week we turn our attention to small-cap stocks that are widely held among our medalist funds in this area.

One change to our methodology involves this move from the large end of the market to the small end. Large-cap fund managers tend to stick with larger companies for their portfolios, of course, which leaves them with a relatively small pool of a few hundred names from which to choose. Small-cap fund managers, by contrast, have a much larger pool of names from which to choose--thousands, in fact. As a result, stock overlap among small-cap funds is far less prevalent than it is among large-cap funds. Therefore, rather than dividing small-cap funds into growth, blend, and value categories as we did with large-cap funds last week, we've identified stocks that overlap across all small-cap fund types. In other words, of the broad selection of small-cap stocks available, the ones listed below are most widely held among small-cap funds that Morningstar analysts recommend.

The same caveats from last week's exercise apply here. We've excluded index funds because their managers don't make active stock picks, and portfolio data for funds varies with regard to the date it was reported, so the number of funds owning a specific stock is somewhat fluid. What we end up with is a list of stocks that, at a minimum, were recently held by multiple quality small-cap funds.

Our first list includes the stocks that appear most often in these funds' portfolios. Along with information on the number of funds owning each stock, we've included the stock's rank in the Russell 2000 Index, a widely used proxy for the small-cap market. Some stocks on the list are not in the index, in which case you'll see "N/A" in that column. For those that are part of the index, their ranking provides an indication of the company's relative size. For example,  CoStar Group (CSGP), one of the index's top holdings, has a market capitalization of $5 billion whereas Hibbett Sports (HIBB), the index's 319th largest holding, has a market cap of just $1.5 billion.

 Most Widely Held Stocks Among Small-Cap Medalist Funds
Company # of Funds Owning Russell 2000 Index Ranking Industry
Tyler Technologies (TYL) 12 62 Software-Application
Aaron's (AAN) 9 N/A Rental & Leasing Services
CoStar (CSGP) 9 4 Real Estate Services
Financial Engines (FNGN) 9 48 Asset Management
Hibbett Sports (HIBB) 9 319 Specialty Retail
Kennametal (KMT) 9 N/A Tools & Accessories
Acuity Brands (AYI) 8 3 Electronic Components
Avis Budget (CAR) 8 N/A Rental & Leasing Services
Belden (BDC) 8 49 Electronic Components
CNO Financial (CNO) 8 14 Insurance--Life
Endurance Specialty (ENH) 8 N/A Insurance--P & C
PolyOne (POL) 8 22 Specialty Chemicals
Ultimate Software (ULTI) 8 7 Software-Infrastucture
Total number of funds: 59 (active management only)

Most of the stocks on the list above are not covered by Morningstar's equity analyst team, but you'll still find plenty of information on stock performance, company filings, financials, and more on Morningstar.com. 

For investors wishing to read more about widely held small-cap stocks that Morningstar analysts do cover, we offer the following list, which also includes each company's Morningstar Rating for stocks. (Ratings are only issued for stocks that a Morningstar analyst covers.) Keep in mind that this is a forward-looking rating, as opposed to the Morningstar Rating for funds, which is backward-looking. The stock star rating represents the degree to which our analysts consider a company's shares undervalued (4 or 5 stars), fairly valued (3 stars), or overvalued (1 or 2 stars).

 Most Widely Held Analyst-Rated Stocks Among Small-Cap Medalist Funds
 Company # Funds Owning Russell Index Ranking * Industry Star Rating
CoStar (CSGP) 9 4 Real Estate Services
Incyte (INCY) 7 N/A Biotechnology
SBV Financial Group (SIVB) 7 N/A Banks--Regional-U.S.
Commercial Metals (CMC) 6 129 Steel
Owens & Minor (OMI) 6 131 Medical Distribution
Stifel Financial (SF) 6 50 Capital Markets
Waddell & Reed (WDR) 6 N/A Asset Management
Actuant (ATU) 5 99 Diversified Industrials
Federated Investors (FII) 5 N/A Asset Management
Graco (GGG) 5 N/A Diversified Industrials
Hub Group (HUBG) 5 335 Integ. Shipng/Logistics
Ingram Micro (IM) 5 N/A Computer Distribution
MSC Industrial Direct (MSM) 5 N/A Industrial Distribution
Reliance Steel and Alum. (RS) 5 N/A Metal Fabrication
Webster Financial (WBS) 5 74 Banks--Regional-U.S.
Wesco International (WCC) 5 N/A Industrial Distribution
Western Refining (WNR) 5 159 Oil & Gas Refin/Mktng
Total number of funds: 59 (active management only)
Star Ratings as of Feb. 18
* Rank in Russell 2000 Index

Adam Zoll does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.