Wading tentatively in the big pool

Small caps, which we define as companies with market caps of less than $300 million, fared pretty well in the reporting period just gone, which for most was for the 12 months to June 30. The companies are more resilient than many believe. If they weren't, they wouldn't be in business. The notable exceptions are those that have recently gained entry through poor performance. It's not a good thing being small, if you have recently been big.

Currency means confidence Companies, which have the currency wind in their sails, have been much more bullish about their outlook statements. This stands out in a results season characterised by many senior executives too afraid to put their necks on the block and make predictions.

Companies that have significant offshore earnings are more confident about future earnings because they have battled for years with a highly valued Australian dollar. Now that it's coming off, they have a lot to cheer about. Companies in this category include electronic car parts catalogue producer Infomedia, biotechnology companies Sirtex Medical and Acrux, as well as law firm Slater & Gordon, which is benefiting from its British acquisition.

Some housing recovery stocks aren't seeing the love We acknowledge that real estate sales group AV Jennings had a ripper off the back of growth in house prices. But beneficiaries such as aluminium products manufacturer Capral, furniture manufacturer and retailer Fantastic, and online accommodation group Wotif showed that times are still tough for companies reliant on consumer spending.

The election can't happen fast enough January 30, 2013, is a day Specialty Fashion's chief executive Gary Perlstein remembers well: "The day Julia Gillard called the election for September 14 things slowed down. Normally, we get five weeks' notice, not nine months!" Virtually every senior executive we have spoken to hopes business confidence improves after September 7.

Mining-services companies diversify Forge, Decmil and RCR Tomlinson have all made acquisitions that reduce their exposure to Western Australia and mining. For example, on top of announcing a 27 per cent increase in its net profit to June 30, RCR recently completed its acquisition of Sydney-based Norfolk, an electrical maintenance business.

The pain is there for all to see, as earnings take a dive because of cancelled or delayed mining projects. Just look at results and share price performances of drilling services group Boart Longyear and accommodation specialist Fleetwood.

Stay healthy and keep in touch The health and telco theme has worked at the smaller end of the spectrum. Big performers at the small end include wireless communications specialist BigAir and voice over the internet supplier My NetFone. On the health side, impressive results came from specialty pharmaceuticals company Mayne Pharma, and medical device specialists Sirtex Medical and Allied Health.

Richard Hemming edits the fortnightly newsletter Under the Radar Report: Small Caps.