Featured Screens

Small-Cap Stocks Surge in the Information Vacuum

A combination of government policy relief and the “data vacuum” resulting from the federal government shutdown helped propel small-cap stocks to a rare outperformance in November 2025.

The S&P SmallCap 600 gained 2.4% for the month while the S&P 500 dipped 0.04%, bucking the trend of large-cap tech stock domination that has characterized most of the 2025 year. 

Perhaps the most defining “non-event” of November was the lack of official government economic data. Due to the government shutdown, the Bureau of Labor Statistics (BLS) did not release the official October Employment Report or the October CPI inflation data. 

This information vacuum caused investors to rely on private sector data (like ADP payrolls) and sentiment instead of reacting to potentially hot inflation prints or volatile jobs numbers. Following a “no news is good news” playbook, the lack of negative data allowed “rate cut hopes” to run unchecked, thus fueling risk-on sentiment for small-cap stocks.

Two other developments this month directly benefited smaller companies.

First, the surprise tariff relief that arrived in early November served as a tangible positive catalyst for small caps. The White House’s trade deal included removing ten percentage points of the cumulative tariff rate on Chinese imports.

Since small-cap companies often lack the complex supply chains of large multinationals, they are more sensitive to import costs. The tariff reduction directly lowers input costs and improves margins for many companies, and this sparked a rally in manufacturing and retail-heavy small caps.

Secondly, despite the lack of official CPI data, the market moved aggressively to price in a Federal Reserve interest rate cut for December, especially after the ADP Employment Report showed private sector jobs grew by only 42,000 in October, signaling a cooling economy.

As small companies carry more floating-rate debt than large caps, the intensified belief that “cheaper money” is coming in December acted as rocket fuel for the sector, particularly for regional banks and real estate stocks.

Regional banks and financial service companies surged on the “steepening yield curve” amid hopes that lower rates will revive loan demand and reduce balance sheet pressure.

Energy companies also benefited from geopolitical stabilization in the Red Sea/Gulf of Aden and “soft landing” hopes that imply sustained fuel demand. 

Reduced fears of supply chain bottlenecks and shipping cost spikes also eased pressures on smaller companies that cannot negotiate long-term shipping contracts like Walmart or Amazon

Small-cap biotech and healthcare firms lagged the broader rally, though, with a growing divergence between “value” and “growth” sectors beginning to emerge in the month.

In the near term, investor psychology and market sentiment will likely continue to be the key drivers of equity performance, but over the long-term fundamentals will always win out. Quality companies like those featured in the SmallCap Informer will eventually reap benefits for savvy and patient investors.
 

In this issue of the SmallCap Informer, we introduce a financial services firm that serves a vital American industry but also provides a modicum of defensive positioning.

Stay the course!

• DOUG GERLACH

Subscribers can read Doug's complete commentary and the in-depth profile of our recommended small company stock in the current issue of the SmallCap Informer stock newsletter. Not a subscriber? Subscribe to the SmallCap Informer and get monthly small company stock recommendations and updated buy/sell prices for each of the ~40 high-quality small company stocks currently covered in the newsletter.

Find BetterInvesting-Style Stocks

You can find companies that will look good on a Stock Selection Guide using this sample BetterInvesting stock screen.

Our featured stock screen, "BetterInvesting 1," will help you find companies that meet the minimum criteria for purchase as defined by BetterInvesting's Stock Selection Guide (SSG). This screen looks for companies that meet the following requirements:
   * Historical earnings per share and revenue growth over the past 10 years at an average annual rate higher than 15 percent.
   * The consistency of the EPS growth over the past five years, as measured by the R2 figure, must be very high (greater than 0.95).
   * The Pre-Tax Profit Margin and Return on Equity (from Section 2 of the SSG) must be stable or growing.
   * The Relative Value of the stock at its current price must be less than 100% (in other words, the Current P/E Ratio must be below the Average P/E Ratio of the last five years).

This screen is very rigid and will likely turn up only a few candidates for you to consider.

As with all stock screens, you must continue on with your own research in order to validate the results before reaching a conclusion and making any purchase for your portfolio.

View the screen.

ICLUB Growth Screen

Find Stocks with Above-Average Growth

Average company growth can vary significantly by industry group, but quality companies in lower-growth industries can add stability and lessen risk in your portfolio.

The ICLUB Growth pre-defined screen is meant to find companies that have consistent earnings per share and revenue growth that is higher than the average for each company's industry group using the following:
   * Historical earnings per share and revenue growth over the past one, three, and five years at an average annual rate higher than the average rate for each company's industry group.
   * A Quality Rating that is Acceptable (between 3.3 and 6.6) or Desirable (between 6.7 and 10.0).

By looking at growth rates over various periods, this screen will turn up companies that may be industries that have been affected by an industry turndown or economic cycle. In those cases, the strongest companies often are less affected by these factors, so their EPS or revenues may not decline as severely as some of their peers.

This screen has no valuation metrics assigned to it, so further study is required to determine if any of these stocks are reasonable prices at the current time.

As with all stock screens, you must continue on with your own research in order to validate the results before reaching a conclusion and making any purchase for your portfolio.

View the screen.