The Greek small-caps market is considered very attractive; in fact, according to a report («Small-Cap Panorama»), released on Monday by investment bank Smith Barney, a Citigroup company, it is the third most attractive in Europe following Austria and Portugal. Smith Barney’s assessment of European small-caps markets’ attractiveness is based on three criteria: the «composite valuation measure,» which is an equally weighted combination of 12-month forward price-to-earnings and price-to-book factors; a 12-month forward earnings revisions ratio, defined as «the number of earnings upgrades over the next 12 months (minus) downgrades as a percentage of the total number of analysts’ estimates;» and, finally, earnings surprise scores. These «correspond to the number of stocks that are forecast to beat consensus expectations (minus) the number of stocks that are likely to give a negative surprise as a percentage of the total number of stocks.» On the basis of the above criteria, the Greek small-caps market is in third place, one place down from the last evaluation, made in early December. The small-caps referred to in the report are defined using international criteria. Greek companies mentioned as small-caps in the report, such as cement firm Titan and Emporiki Bank, are considered blue chips on the Athens Stock Exchange, while Hellenic Exchanges is among the mid-caps. «Unlike large-cap portfolio managers, small-cap managers tend to focus more on country than sector valuations and tend to compare stocks with their country rather than sector peers,» says the report, which goes on to list Titan among the attractive stocks «based upon higher relative valuation, earnings revisions and price momentum,» while Emporiki Bank and Hellenic Exchanges are considered unattractive. European investors who preferred small-caps were rewarded, the Smith Barney report says, since the relevant pan-European index rose 20 percent, compared to 10 percent for blue chips. The report makes here no special mention of Greece, where small-caps lost over a quarter of their value, while blue chips thrived. Among the best-performing sectors in small-caps were energy and utilities, while high-tech stocks and telecoms suffered. As for this year, Smith Barney expects a 15-20 percent rise in the prices of small-caps, saying that stronger economic growth will positively affect earnings. There are, however, possible risks stemming from a likely rise in interest rates, exchange rate fluctuations and the shrinking of profit margins.