Many equity investors have missed out on the solid sharemarket returns over the last two years after being burnt by the global financial crisis. But it would be a mistake not to get back into stocks in 2014.
Small caps are the place to be this year as they are better placed to deliver returns. The question is, what strategies should investors use given the strong rally we’ve had last year?
While we have highlighted a number of ways to approach emerging stocks in the past, there is one strategy that stands out at this time of the year.
It follows the “Dogs of Dow” theory used by serious investors. It’s almost a yearly ritual to buy the 10 worst performing stocks on the Dow Jones Industrial Average (which conversely translates to the ones with the highest yield given that price and yields move in opposite directions) on the belief that businesses move in cycles, and what is down in one year will rebound in the following 12-months.
Australian investors have good reason to be tempted to look at the biggest laggards on the Uncapped 100 given that a number of pieces of research have shown the “Dogs of Dow” theory works and the fact that laggards look “cheap” in a rising market.
But don’t click on the “buy” button until you read our findings on this strategy, as the rules for the Dow are very different for emerging stocks – and I am not talking about the obvious differences like dividends or earnings growth.
The good news though is that using the one-year performance table as a guide can pay off very handsomely, as long as you remember a few simple truths.
Size and numbers matter
One of the key reasons why the “Dogs of Dow” theory shouldn’t be applied literally to small cap stocks relates to the size of these businesses. Stocks on the Dow are industry giants with very well established businesses. When such stocks fall from grace for the year, it is more often than not driven by cyclical factors.
In contrast, when emerging companies fall out of favour it can often reflect structural issues with their business models or industry. Structural challenges are very much more difficult, and usually takes a lot longer, to address.
The other point is the number of stocks that make up the respective indices. If you bought the 10 biggest dogs, you have effectively purchased a third of the Dow, while doing the same would only net you a 10% exposure for the Uncapped 100 and 5% of the S&P/ASX Small Ordinaries Index.
These factors are why you can often get away with indiscriminately buying the biggest losers from the Dow, but not small caps.
Play both sides
The fact that there is only around a 50% chance that a laggard from the Uncapped 100 in a given year will outperform in the next 12-months means that blindly buying “cheap-looking” stocks will often land you in hot water.
The trick here is to widen your scope and to look at both the 10 worst and 10 best performers for 2014 pocket rockets.
Top 10 performing Uncapped 100 stocks in 2013
|Code||Company||Share price rtn (%)|
|MYX||Mayne Pharma Group||146.7|
Worst 10 performing Uncapped 100 stocks in 2013
|Code||Company||Share price rtn (%)|
|UBI||Universal Biosensors Inc||-49.7|
|SAR||Saracen Mineral Holdings||-51.3|
|Source: Eureka Report, Bloomberg|
The 10 best performers on the Uncapped 100 have a similar tendency to outperform in the preceding 12-months as the dogs due to the same structural argument outlined above.
While the best-performing blue-chips are often aided by a cyclical tailwind, emerging stocks that top the table often enjoy some form of structural advantage – either being a “technology disruptor”, such as mobile payment company Mint Wireless (MNW) and mobile funds transfer provider eServGlobal (ESV); or an early mover into a new or niche market, such as aerial mapping company Nearmap (NEA).
A structural advantage can cause a small cap to outperform for an extended period, although this doesn’t mean one should shy away from taking profits, as highlighted in James Kirby’s article 10 Things you must do in 2014. After all, small cap stocks almost never move up in a straight line, and having no financial exposure to a stock will allow you to be more objective in determining the chance of the stock entering the next up-cycle or re-rating.
Hooking the big fish
This all sounds like a lot of work, but does the reward justify the risks? Looking for stocks at the worst and best end of the market is like deep-sea fishing – there is no more fertile ground than the two ends of the league table if you are looking to hook a big fish.
History shows that the top and bottom 10 stocks of the Uncapped 100 are five times more volatile than our collection of emerging stocks in the following year, and it doesn’t matter if the stock is at the top or the bottom of the performance table.
Further, nearly every one of these stocks goes on to make big moves in the next 12-months. It’s only a question of whether the move is up or down.
This is why alpha-hunters can’t afford not to put these 20 stocks under the microscope, although I would caution most retail investors to use this tactic sparingly. Looking for stocks at the deep end should be used to supplement your core portfolio strategy given the high-risk nature of buying over- and underachievers.
2014 movers and shakers
This brings us to the more pertinent question. Which stocks on the 2013 league table are likely to go up or down materially this calendar year?
This isn’t an easy call, especially for the best performing Uncapped 100 stock for 2013. Mint Wireless is up a whopping 1622% and I don’t think we will see anything close to that number this year.
The stock has nearly doubled in price since we rated it as an “outperform” in October and I estimate that it has to a further 17% to climb to reach fair value at around 42 cents. But I would be surprised if Mint Wireless made it into the top 10 again this year, unless we see an accelerated adoption of its service.
The one I am tipping could make a big move in the right direction in 2014 is Universal Biosensors (UBI).
I know it’s a big call given the negativity hanging over the medical device company. The stock is, after all, the worst performer on my current list of “outperform” calls, with a more than 20% fall since I rated it on September 4 last year.
Investors have dropped the stock like a hot potato after management warned last year that the launch of the coagulation testing device it was developing with Siemens would be delayed to the first-half of this calendar year from the end of 2013 due to insufficient patient enrolments for the clinical trial.
This raised questions about the credibility of management and sparked worries that there is a deeper underlying issue with the device. After all, Universal Biosensors seems to be accident prone and has thrown up a number of unpleasant surprises, such as when LifeScan announced a product recall. LifeScan, a Johnson & Johnson subsidiary, jointly developed a glucose testing device with Universal Biosensors.
Universal Biosensors also surprised many with a debt funding announcement just before Christmas for a facility of up to $US25 million with Athyrium Capital Management. The debt carries a 10.5% interest rate and the company will issue a warrant to the lender giving it 4.5 million shares at an exercise price of $1 a share.
However Universal Biosensors’ chief financial officer, Salesh Balak, is urging shareholders to keep the faith as the launch of the Siemens’ product is on track to happen before June and the company will have a more detailed update by the end of this month.
He also stressed that Universal Biosensors isn’t in need of cash. The Athyrium facility is more an insurance policy to ensure the company has enough firepower to complete the development of the Siemens’ device, which will be used by medical professionals, and a self-testing version for patients, which Universal Biosensors plans to take to market on its own through a distributor.
“We know what our expenditure is, but we have no control over our revenue and we could get stuck for some reason, such as the LifeScan recall last year,” says Balak. “The loan is only a risk mitigation exercise.”
LifeScan pays US1 cent to Universal Biosensors for every one-use test strip it sells for its glucose tester. The payment is made every quarter, and the sales update for the three months to December, which will be released next week, is likely to come in ahead of management’s expectations.
WilsonHTM Investment Group analyst, Shane Storey, also believes the stock is looking very cheap around current levels.
“If all goes according to plan over the next two years, the stock can recapture its highs of four years ago [when it was trading above $2 a share],” says Storey. “But the stock is speculative.”
Other stocks in the group of 20 that are likely to make big upward jumps this year are eServGlobal (ESV) and Starpharma Holdings (SPL).
The former has more than doubled in price over 2013, but I believe the market will re-rate the stock further this year as management updates investors on the market adoption of its new HomeSend product.
HomeSend, which allows mobile phone users to transfer cash to each other, is a joint venture between eServGlobal, MasterCard and European telco BICS.
The service currently operates in 50 countries, giving 1.2 billion mobile phone subscribers access to the service. The stock has gained 11% since we upgraded it to “outperform” from “neutral” on December 13.
Starpharma is another of our “outperform” calls from 2013 that is likely to see a significant rise in the coming months if it can clinch a partnership deal with a global pharmaceutical giant as I expect it would.
The biotech’s dendrimer technology, which can make existing drugs more effective, has been kicking goals late last year with Cancer Australia awarding it funding to develop a lung cancer treatment using its technology; and successful tests showing that the dendrimer significantly lowers toxicity in two major cancer drugs, oxaliplatin and docetaxel. You can read more about Starpharma here.
On the flipside, drilling products and services firm Imdex (IMD) could remain on the down and out this year even after its 63% plunge from grace in 2013.
Commentary from drilling companies around the world remains downbeat as miners are shying away from exploration activity and greenfield projects. Miners will instead be more focused on maximising returns from existing mines in 2014.
Of course, all bets are off if the company receives a takeover bid – an event that cannot be discounted given that the sector is ripe for consolidation as we have pointed out in Five small cap trends for 2014.
One 2013 outperformer that is at risk of experiencing a reversal in fortunes is Greencross (GXL). The veterinary services group has grown strongly over the past few years by acquiring independent veterinary practices at good prices.
It recently announced a change in strategy and has expanded into pet supplies. The idea is to provide a one-stop shop for pet owners to buy products and to seek medical services.
I don’t believe shareholders fully appreciate the execution risks involved and the stock is priced for perfection after its 145% rally in 2013. This put the stock on a consensus price earnings multiple of between 35 times and 20 times over the next three years. That’s lofty, even by global standards.
A small misstep in integrating the business is all it takes to trigger a steep slide in the share price, which was trading at $8.04 on Wednesday afternoon. I do not have a rating on Imdex or Greencross.
Think big, go smalls!
* This article is part of the “It's Time” series in Eureka Report focussing on new opportunities for investors in 2014. Click here to see the entire series.
List of Uncapped 100 stocks with an "outperform" recommendation
|Company||Code||Article date||Price*||Last price ($)||Article Name|
|eBet||EBT||26-Jun-13||1.13||2.80||Small cap with biggest earnings upgrade|
|Silex Systems||SLX||3-Jul-13||2.32||2.08||Why a dog can be an investor's best friend|
|Newsat||NWT||3-Jul-13||0.40||0.49||Why a dog can be an investor's best friend|
|Tiger Resources||TGS||3-Jul-13||0.19||0.38||Why a dog can be an investor's best friend|
|M2 Telecommunications Group||MTU||10-Jul-13||6.02||6.54||Big expectations for small caps|
|Starpharma Holdings||SPL||17-Jul-13||0.94||0.85||Five bargains for under a buck|
|Colorpak||CKL||17-Jul-13||0.73||0.85||Five bargains for under a buck|
|GI Dynamics||GID||17-Jul-13||0.60||0.80||Five bargains for under a buck|
|Horizon Oil||HZN||17-Jul-13||0.36||0.32||Five bargains for under a buck|
|Collins Foods||CKF||7-Aug-13||1.76||1.90||The next dividend dazzelers|
|LogiCamms||LCM||7-Aug-13||1.47||1.38||The next dividend dazzelers|
|NRW Holdings||NWH||14-Aug-13||1.14||1.27||A mining services revival?|
|WDS||WDS||14-Aug-13||0.59||0.81||A mining services revival?|
|Thinksmart||TSM||21-Aug-13||0.36||0.41||Biggest smalls earnings surprises|
|Beadell Resources||BDR||28-Aug-13||0.87||0.80||Short-selling gold signals|
|Universal Biosensors||UBI||4-Sep-13||0.68||0.50||Smalls in sweet spot|
|Forge Group||FGE||18-Sep-13||5.23||0.75||Small cap surprises for 2014|
|Specialty Fashion Group||SFH||18-Sep-13||0.93||0.88||Small cap surprises for 2014|
|Mint Wireless||MNW||2-Oct-13||0.18||0.37||Four new stocks for Uncapped|
|YTC Resources||YTC||9-Oct-13||0.26||0.21||Xmas sale starts early for small caps|
|Ridley Corporation||RIC||16-Oct-13||0.85||0.87||Appetisers from the agri stocks field|
|Wide Bay Australia||WBB||16-Oct-13||5.60||5.79||Appetisers from the agri stocks field|
|STW Communications||SGN||30-Oct-13||1.58||1.51||Small consumer stocks at Christmas crossroads|
|Retail Food Group||RFG||30-Oct-13||4.58||4.54||Small consumer stocks at Christmas crossroads|
|Nanosonic||NAN||6-Nov-13||0.83||0.85||First profit, first choice for stock pickers|
|AMA Group||AMA||6-Nov-13||0.37||0.33||AMA chief's double plan|
|eServGlobal||ESV||13-Dec-13||0.70||0.78||Calculating Bitcoin's flow-on effect|
|CTI Logistics||CLX||18-Dec-13||2.35||2.58||CTI's road to expansion|
|*At publishing date|
|Source: Eureka Report, Bloomberg|
Uncapped 100 - Australia's most interesting small cap stocks
|Small cap stocks covered by the Uncapped team|
|Code||Name||Rationale||Market cap ($m)||Total return 1-year (%)||Sector (GICS)|
|ACR||Acrux||One of the most successful Australian biotechs in recent history. Widely held by instos.||438.78||-7.9||Health Care|
|ACL||Alchemia /Australia||One of the few biotechs with revenue stream. Good pipeline of oncology treatments.||186.54||76.92||Health Care|
|AOH||Altona Mining||Noteworthy copper play with Xstrata pull-out of Roseby project in Australia and the good ramp up of its Finnish project.||95.80||-26.53||Materials|
|AMA||AMA Group||Good turnaround story but under the automotive services group is radar of most.||110.30||-5.46||Consumer Discretionary|
|AMM||Amcom Telecommunications||Well covered junior telco but good candidate for core holding.||500.12||44.2||Telecommunication Services|
|AZZ||Antares Energy||Liquid with good insto support. Already in production with exploration upside in Texas.||133.88||-3.67||Energy|
|ARP||ARB Corp||Well covered but good candidate for core holding due to quality management.||866.15||6.51||Consumer Discretionary|
|AAD||Ardent Leisure Group||Widely held stock. Earnings more defensive than anticipated. Good yield. Potential core holding.||814.16||46.72||Consumer Discretionary|
|AJA||Astro Japan Property Group||Strong leverage to Japanese economy makes this an interesting stock to watch.||238.60||25.85||Financials|
|AUB||Austbrokers Holdings||The insurance broker is a strong performer. Widely held and well liked by small cap investors.||669.15||38.88||Financials|
|AEU||Australian Education Trust||Well performing childcare centre property owner. Good yield story and outlook.||305.55||19.8||Financials|
|BDR||Beadell Resources||Will be a very big FY14 for miner as it has to prove it aims to produce 200,000 ounces of gold a year.||630.61||-22.57||Materials|
|BGA||Bega Cheese||Corporate interest in Australian food companies makes the cheese maker worth following.||691.20||139.07||Consumer Staples|
|IMF||Bentham IMF||Litigation funder is unique stock. Stock not liquid but its outlook appears promising given the number of potential class action lawsuits.||299.58||7.03||Financials|
|BGL||BigAir Group||The wireless small cap has gained strong following over past year or two but is often overlooked by investors and the press.||136.15||36.53||Telecommunication Services|
|BNO||Bionomics||One of the larger cancer treatment developers in this market.||289.89||74.77||Health Care|
|BOL||Boom Logistics||Crane hire group is riding out the downturn in construction. It's widely held by instos and is very liquid.||73.60||-45.61||Industrials|
|BRU||Buru Energy||Substantial size but not often covered by press. Widely held with good insto support.||573.13||-17.24||Energy|
|CAA||Capral||An aluminium manufacturer that is actually holding up relatively well given that manufacturing is on the nose.||82.82||-18.6||Materials|
|CCV||Cash Converters International||Strong performance is attracting investors. It's Australia's only listed pawn shop and pay day lender.||383.67||-21.93||Consumer Discretionary|
|CWP||Cedar Woods Properties||Property developer with good ROE and earnings growth track record.||538.25||60.06||Financials|
|CUV||Clinuvel Pharmaceuticals||Interesting skin disorder treatment developer that has done reasonably well over past year||55.41||-28.92||Health Care|
|CLV||Clover Corp||One of the star performers in 2012. Operates in growing but relatively stable niche.||85.89||4.87||Health Care|
|CLH||Collection House||In similar space as Credit Corp. Strong stock performance has attracted a following and the stock appears to be well placed to run further||226.02||70.1||Industrials|
|CKF||Collins Foods||One of the few food franchise listed companies.||176.70||37.04||Consumer Discretionary|
|CKL||Colorpak||The small cap packaging company has grown via acquisitions over past few years.||67.68||49.95||Materials|
|CCP||Credit Corp Group||Strong price run attracted good investor interest. Leveraged to any rise in loan defaults. Not well covered by press.||429.03||9.34||Industrials|
|CLX||CTI Logistics||Logistics solution company with good track record of growth and exposure to online retail and large gas projects on West coast.||167.71||81.89||Industrials|
|DTL||Data#3||Well respected IT company that receives little press coverage.||140.12||-30.49||Information Technology|
|DRM||Doray Minerals||Widely held by instos. One of the more favoured gold explorers by brokers.||88.68||-16.11||Materials|
|DWS||DWS||Will be a big beneficiary if governments start spending on IT again.||169.42||-15.93||Information Technology|
|EBT||eBet||Potential alternative to star performer Ainsworth Tech. Has exclusive deal with US poker machine maker WMS.||42.91||113.66||Consumer Discretionary|
|EML||Emerchants||Trying to change way corporates and governments disburse cash with its trackable and controllable debit card offering. If company can get $1 billion in loaded value on cards, the stock will surge.||76.05||154.17||Financials|
|ESV||Eservglobal||Mobile money transfer company that has been gaining traction. Widely held by instos but low press coverage||196.50||72.22||Information Technology|
|FGE||Forge Group||Good track record has been marred by a recent shock downgrade and capital raising. How long will it take to redeem itself?||93.06||-78.16||Industrials|
|GEM||G8 Education||Only listed childcare operator. Acquisition strategy paying off with stock delivering solid gains.||944.34||97.31||Consumer Discretionary|
|GXY||Galaxy Resources||Good upside potential if it can get its problem-prone Jiangsu plant back on track. Won't be easy to right this ship.||57.52||-79.23||Materials|
|GHC||Generation Healthcare REIT||One of the more interesting REITs. Income is more defensive than typical property stock and its greenfield expansion gives it earnings growth potential.||141.65||33.41||Financials|
|GID||GI Dynamics Inc||Largely forgotten by investors after poor IPO but could attract attention this year as it looks to gain US approval to use its intestinal liner on diabetics.||311.98||19.4||Health Care|
|GXL||Greencross||Acquisitive veterinary group that is embarking on new growth phase via merger with pet products retailer||303.34||132.07||Health Care|
|HSN||Hansen Technologies||Operates in a high potential/growth industry but is not covered by press or brokers.||197.50||43.83||Information Technology|
|HZN||Horizon Oil||One of better regarded small energy stocks that doesn't receive much media attention.||416.37||-27.1||Energy|
|IMD||Imdex||Drilling company is well supported by instos and should benefit from any rebound in exploration activity.||118.92||-68.01||Materials|
|IFM||Infomedia||Interesting tech play in the car parts market. Strong share price gain but gets little air play.||184.50||50.69||Information Technology|
|IPP||iProperty Group||Worth watching as it is trying to be the REA Group of Asia.||347.38||116.38||Information Technology|
|JIN||Jumbo Interactive||Innovative small cap facing off industry dominated by giants. Worth watching to see if it can carve out a profitable global business.||90.57||-23.18||Consumer Discretionary|
|KOV||Korvest||The construction products and services supplier has been hit by project delays and deferrals. But its relatively high yield could give it some support.||55.97||0.38||Industrials|
|LGD||Legend Corp||Electronic parts supplier to utilities and other industries. Stable earnings with good yield. Often overlooked.||79.02||35.34||Information Technology|
|LCM||LogiCamms||Strong price performance and reasonable valuation attracting interest.||99.29||25.28||Industrials|
|MTU||M2 Telecommunications Group||Amazing growth story and well run company. High free float and strong insto support.||1,176.76||66.39||Telecommunication Services|
|MXI||MaxiTRANS Industries||Transport equipment maker posted good interim result. Has appealing yield and growth.||226.77||37.73||Industrials|
|MYX||Mayne Pharma Group||Sizeable generic drug maker with interesting board members.||391.60||110.61||Health Care|
|MMS||McMillan Shakespeare||One of the best performers since the GFC, but ongoing risk of change to FBT rules will hang over the company.||887.58||-5.37||Industrials|
|MCP||McPherson's||The personal care and household products supplier had been relatively insulated from volatile discretionary spend and online threat, but growing earnings is still a challenge.||151.80||-19.55||Consumer Discretionary|
|MLB||Melbourne IT||A perennial underperformer could be interesting turnaround story as it undergoes a restructure.||161.47||23.55||Information Technology|
|MRM||Mermaid Marine Australia||Its strategically located facility on WA coast gives it a key advantage over competition in servicing Gorgon & Pluto projects.||716.57||-14.73||Industrials|
|MNW||Mint Wireless||Huge market potential if the mobile card payment solutions provider can gain market traction. Management aiming for $1 billion in transaction value a year.||147.41||1821.05||Information Technology|
|MOC||Mortgage Choice||Has a good track record and is leveraged to any housing recovery. The stock is also liquid with good insto support.||356.49||72.46||Financials|
|MYS||MyState||Well regarded and could make good alternative to bank stocks. Has good yield and earnings growth over past few years.||421.07||38.28||Financials|
|NAN||Nanosonics||A successful medical tech story. Should be close to turning in maiden profit with its disinfection device.||223.66||60.38||Health Care|
|NEA||Nearmap||A stellar performer with an Interesting business that offers high quality aerial maps to companies & government.||198.64||750||Information Technology|
|NTC||NetComm Wireless||Under appreciated small IT hardware maker that is punching above its weight. Hardly covered by press.||44.40||72.5||Information Technology|
|NWT||Newsat||Potential large cap if it can launch its own satellite in 2015.||292.77||#N/A N/A||Telecommunication Services|
|NXT||NEXTDC||The cloud computing company is an IT sector darling. Fairly widely held and followed.||446.01||31.98||Telecommunication Services|
|NHF||NIB Holdings /Australia||Only listed health insurer. Widely held. Good performer.||1,167.75||34.46||Financials|
|NWH||NRW Holdings||One of the better regarded mining & civil contractors with good track record in delivering on projects.||357.67||-25.42||Industrials|
|OTH||Onthehouse Holdings||Alternative small cap to online property leader REA Group. It is trying to use more timely housing data as a competitive edge against REA.||46.84||-32.14||Consumer Discretionary|
|PGC||Paragon Care||Emerging hospital equipment supplier that has been ignored by market.||23.86||53.16||Health Care|
|PFL||Patties Foods||Illiquid stock but has suite of well recognised consumer brands. Defensive yield.||194.11||-8.12||Consumer Staples|
|PEN||Peninsula Energy||Widely held by instos and large free float. It's the only uranium miner on the list.||71.54||-42.11||Energy|
|POH||Phosphagenics||Sizable biotech with a game changing FY14 year ahead. Good insto following but questions of poor audit and governance standard could dog company.||117.35||-17.86||Health Care|
|RCG||RCG Corp||The footwear retailer is one of the best performing consumer stocks as online competition is not a big threat. Company has a good yield as well.||204.60||77.55||Consumer Discretionary|
|RCR||RCR Tomlinson||Good first half FY13 result and outlook, but will its fortunes change this year with the mining capex slowdown?||427.18||52.91||Industrials|
|RKN||Reckon||Fierce competition for cloud base accounting software puts it in firing line.||269.02||-9.55||Information Technology|
|REX||Regional Express Holdings||Well run airline that is overshadowed by Virgin and Qantas.||101.34||-19.3||Industrials|
|RFG||Retail Food Group||Owns a number of well know franchise brands. Widely followed by instos.||657.59||45.49||Consumer Discretionary|
|RIC||Ridley Corp||High corporate interest in the sector and the shrinking pool of agri listed stocks make Ridley worth following.||268.57||-16.28||Consumer Staples|
|RUL||RungePincockMinarco||IT company to resource industry. Facing tough operating climate with new CEO trying to restructure and turnaround company.||100.36||7.58||Industrials|
|SAR||Saracen Mineral Holdings||Emerging gold producer that is widely held by instos. Hitting milestones and looks cheap. Key asset is close to gold majors, which makes it a potential takeover target.||126.49||-43.33||Materials|
|SHV||Select Harvests||Noteworthy for turbulent past and exposure to soft commodity market.||311.05||241.78||Consumer Staples|
|SLX||Silex Systems||Its uranium enrichment technology could become one of Australia's best innovations given its potential to change the nuclear power industry.||352.52||-37.08||Information Technology|
|SIV||Silver Chef||Strong jump in the share price of the equipment financing group has attracted a good following.||151.95||-12.55||Industrials|
|SRX||Sirtex Medical||A shining star in the biotech space and one of the best performing stocks in 2012. Great product (liver cancer treatment) and bright outlook.||766.44||5.74||Health Care|
|SFH||Specialty Fashion Group||In early stages of turnaround. Can the women's apparel retailer sustain the momentum?||171.09||49.39||Consumer Discretionary|
|SPL||Starpharma Holdings||Noteworthy for its good pipeline of innovations. Well run, widely followed.||241.92||-34.62||Health Care|
|SGN||STW Communications Group||One of few companies able to benefit from online shift. Widely held and good insto support.||605.74||34.37||Consumer Discretionary|
|SEA||Sundance Energy Australia||Analysts have a favourable take on the oil & gas explorer, but stock is still under radar of most. Sundance provides exposure to prospective Eagle Ford shale.||451.59||21.12||Energy|
|TAN||Tandou||The only direct equity exposure to cotton prices. Also trades water rights and receives little press.||70.15||13.73||Consumer Staples|
|TGR||Tassal Group||Salmon farmer is finally turning a corner with an improved harvest strategy and growing demand for product.||455.64||112.77||Consumer Staples|
|TFC||TFS Corp||The sandalwood products company offers exposure to both the agri and cosmetics industry. It will start commercial harvest this year.||340.00||212.99||Materials|
|TSM||ThinkSmart||Potential turnaround story worth keeping eye on.||67.36||112.82||Financials|
|TGA||Thorn Group||One of few retail stocks that is performing well despite its flat outlook for FY14. The Radio Rentals chain owner is also well supported by instos.||316.41||6.73||Consumer Discretionary|
|TGS||Tiger Resources||Future lies in its Kipoi copper mine expansion in the Congo but miner is fully funded with DRC govt holding 40% stake in tenement. Next 12mths will be interesting.||301.02||7.14||Materials|
|TOX||Tox Free Solutions||Widely held stock in the waste solutions business. Its unique because it operates in a defensive-growth niche.||438.37||6.1||Industrials|
|UBI||Universal Biosensors Inc||Well regarded biotech and one of few that's successfully manufacturing in Australia. Struck deal with a few global medical companies.||86.79||-41.76||Health Care|
|UXC||UXC||Company has turned corner and enjoyed re-rating. What's next?||339.78||12.03||Information Technology|
|VOC||Vocus Communications||Telecom stocks are in favour but Vocus is one of the least covered||277.07||91.98||Telecommunication Services|
|WDS||WDS||Widely held with strong insto support. Engineering contractor diversified across mining, energy and infrastructure.||116.52||74.84||Industrials|
|WBB||Wide Bay Australia||The building society is trying to turn its fortunes around. Also worth watching for its exposure to Queensland housing market, particularly around major resource projects.||209.82||-11.39||Financials|
|YTC||YTC Resources||Next 12-mths will be eventful after YTC secured funding for its projects from Glencore.||68.81||-32.26||Materials|
|Source: Eureka Report, Bloomberg|