What's a small-cap to do?

• Position: Brief Article

RECORD SALES, record earnings, umptiump straight quarters of EPS growth -- "Yet our stock has gone down...What more can we do?" Listening to directors of small-cap companies, I hear a note of resignation; they're frustrated, yet resigned, to Wall Street's neglect.

Despite good or even great financial performance, the raging bull market has neglected many small companies, relegating them to relatively anemic P/E ratios. While their big-cap counterparts enjoy record P/Es in the 20s and 30s, many small-caps suffer with half these multiples. Whereas the Dow and the Nasdaq reached all-time highs, the majority of public stocks were down in 1999. Until the stock market reaches out beyond big-caps and hightechs, small-cap value companies see little hope in trying to gain much recognition, yet alone respect. Is there anything a small-cap CEO can do?

Yes there is. There are numerous financial institutions interested in investing in small-cap companies -- those with market values below $2 billion -- and some are picking out micro-cap firms, particularly those with a strong growth curve. Small-cap money managers are looking for innovative, well-managed companies that dominate a niche which enables them to expand margins and sustain growth. Such companies need not be technology-based, although in today's market, small-cap portfolios are loaded up with fast-growth tech companies.

The competition for attention is intense, and small-cap companies can easily be lost in the shuffle. The...