Small Companies

A RALLY in small company stocks is giving investors hope that the drubbing those stocks have taken the past year has finally come to an end.The Russell 2000 index, a barometer of small company performance, shot up 11 percent in May alone, more than double the performance of the Dow Jones industrial average."

CHICAGO -- The new head of the Small Business Administration, a former executive at a decidedly big business, says his agency must do a better job of helping minority, rural and inner-city small companies grow. "That's a huge social opportunity for us," said Steven C. Preston, who became the SBA's administrator in June. Preston is taking on a small agency with vocal critics who claim that too many federal contracts are going to giant businesses when they should be allocated to small companies.

Executives at the Rockville accounting firm Aronson & Company may soon consider dropping their publicly traded business clients. They say sweeping new accounting reforms designed to curb corporate fraud, and signed into law by President Bush this week, could make it too expensive to audit public companies. "We definitely have it on the radar scope to consider," said Lisa Cines, Aronson's managing partner. "We're waiting to see what the cost will be. There's no question it will cost more; it's just the magnitude of it that's still in question."

You've heard it a thousand times. To grow substantially, small companies have to expand beyond their domestic borders, selling products and services overseas. With Europe, Asia and the Third World purchasing a wide range of products and services, the opportunities are unlimited.But as many CEOs of small and midsized companies have discovered, setting out to do business overseas and actually making it happen are two different things.For newcomers, the biggest challenge is how to get their products or services into markets thousands of miles away.

Are small-growth stocks poised for a rebound? The answer could be yes, if our interviews with small-growth fund managers are any indication. To be sure, these managers have a vested interest in providing a rosy outlook. Even so, there are some good reasons to think better days may be in store for small-growth stocks. For one, some managers highlight the fact that the outlook for earnings is brighter for small companies than for their bigger siblings. They also point out that small caps tend to outperform when stocks emerge from a bear market.

Two Maryland technology companies -- Columbia-based RWD Technologies Inc. and Beltsville's Micros Systems Inc. -- have landed on Business Week's list of "Hot Growth Companies," the magazine's annual ranking of the nation's 100 fastest-growing public companies.RWD Technologies was ranked 39th and Micros 94th. Both were new to the list, which appears in Business Week's May 31 issue.For RWD founder and Chairman Robert W. Deutsch, his company's addition to the list affirms that the technology training and consulting company has implemented the right strategies for continued strong growth.

Robert H. Roche, satisfied that his Westminster-based company was performing well enough at home, hadn't really thought about taking his products abroad. Then the calls started arriving from around the world. Dealers from Asia to Europe had read about Roche's business, CTRL Systems Inc., in trade publications and on the Internet and wanted to buy the firm's hand-held ultrasonic diagnostic tools to resell overseas. "That started us thinking that maybe it wasn't such a bad idea," said Roche, the CTRL president.

180s had all the ingredients of a company that had made it big - rapid growth with few signs of slowing, vendors that couldn't get enough of its products on the shelves and a ranking in various lists as one of the country's top small companies. But behind the scenes, the Baltimore company that had built a following by refashioning traditional products such as earmuffs and sunglasses with design twists was finding a need to reinvent itself. "It was just a typical fast-growing company," said Brent Hollowell, 180s' chief marketing officer.

ACCORDING TO dot.com legend, hot new companies and technological breakthroughs start up in garages, basements -- maybe even tree houses. Young geniuses who can program the VCR, who handle the mouse and cursor keys as if they were pencils (they are, of course), go to work on some new idea and Voila! There's something else to demand more RAM. Not to speak of something to create another 27-year-old millionaire. In the beginning, before Bill Gates made his first billion, it may have worked that way. May still work that way occasionally.

Raising its four-day loss to 102 points, the Dow Jones industrial average fell 17.49 points yesterday and closed at 3,851.60. Interest rate fears weighed heavily on stocks, especially in view of the Federal Reserve's Open Market Committee meeting next week. But Nomura Securities' Carmine Gregoli said on CNBC-TV after yesterday's close, "Third-quarter earnings will come in very strong; I still predict Dow Jones 4,500 by mid-1995."FASTEN SEAT BELT: "New highs in bond yields as the economy barrels ahead.