5 Favoured Small Cap Stocks, Peter Quinton, Head of Research, Bell Potter. Although these stocks have very diverse operations, they share common characteristics. 1) Solid earnings growth over the next two years and/or the potential for earnings upgrade 2) A strong balance sheet 3) Buy or Neutral rating by the Analyst. However, these stocks are primarily cyclical or economically sensitive and likely to remain volatile over the coming months as domestic economic growth waxes and wanes. These are our favoured small caps: GWA Group - a leading manufacturer and distributor of building fixtures and fittings. Oroton Group - a luxury goods retailer. Shine Corporate - the third largest plaintiff litigation firm in Australia. STW Communications Group - a marketing communications group in Australia and New Zealand with a growing footprint in SE Asia. Tox Free Solutions - one of the largest industrial service and waste management businesses in Australia.