Charge Up Your Portfolio with Small Caps

Like all portfolio managers, Dawn Alston Paige uses complex formulas and algorithms to identify stellar stocks. Even though her stock-picking approach may be sophisticated, her criteria for what makes a good investment are easy to understand. “We’re looking for stocks at reasonable valuations that have improving fundamentals,” says Alston Paige, executive vice president of Piedmont Investment Advisors in Durham, North Carolina. “We seek companies that are expanding margins, reporting upside earnings surprises, and beating consensus expectations.”

Alston Paige manages Piedmont’s Small Cap Value Opportunity portfolio, a collection of investments made up largely of companies whose market capitalizations are between $100 million and $2.5 billion. It’s a category she knows well. She’s spent the better part of her 18 years in the financial industry researching and investigating the prospects of small-cap companies. Before joining Piedmont, she co-managed the Small Cap Value fund at the Bloomfield Hills, Michigan, location of Loomis, Sayles & Co. black enterprise spoke to Alston Paige about a handful of small-cap companies whose stocks are poised to benefit from economic recovery.

What is Piedmont’s outlook on the economy for the second half of this year?

We’re cautiously optimistic. I know those are everyone’s favorite words right now. The leading economic indicators are showing strong gains, and that typically bodes well for the economy. While we have some major concerns such as high unemployment and a weak housing market, in general, the majority of the recent economic data continues to support the thesis of a broad economic recovery.

What about the financial markets? Do you expect to see a continuation of the 2009 rebound throughout 2010?

We think there could be a typical midyear reassessment this summer, a healthy correction where investors will begin to ask if stock valuations have gotten a little ahead of themselves. First and second quarter earnings results will influence the severity of any correction. Meanwhile, positive economic data have continued to support the market’s upward bias.