Best of 2011: Small-Cap Stocks

As we continue our review of the top stocks of 2011, here were the year’s three best-performing small-cap stocks based on percentage-point gains:

1. Silicon Motion Technology Corp. (Nasdaq: SIMO)

Market Cap: $662.2 million

2010 Closing Price: $4.25

2011 Closing Price: $20.48

2011 Gains: 380.2%

Silicon was the runaway leader in the semiconductor sector in 2011. The stock’s 380% gains were more than the next nine semiconductor stocks combined – including high-powered tech stock Intel (Nasdaq: INTC).

Semiconductors are used in multimedia consumer electronic applications such as mobile phones, smartphones, digital cameras and tablets. Silicon designs and develops them – and boy did they have a good year. Mobile communications exploded in 2011 with the rise of smartphones and electronic tablets, and that benefited Silicon greatly; Silicon specializes in mobile communications. The company has posted seven consecutive quarters of revenue growth, including a record $63.2 million last quarter. Silicon also had a net income of $0.56 per share in its most recent quarter. Korean phone maker Samsung Electronics (KS) snatched up Silicon’s products by the bushel full as its smartphone and tablet sales exploded in the U.S.

2. Inhibitex (Nasdaq: INHX)

Market Cap: $753 million

2010 Closing Price: $2.60

2011 Closing Price: $10.94

2011 Gains: 321%

The hepatitis-C drug developer made most of its gains in November after a new antiviral treatment passed a clinical trial run with flying colors. That sent the stock up from $3.79 a share on November 2 to $15.51 on December 2. It has since fallen off a cliff, dipping all the way to $9.74 a share in early trading today. But that doesn’t overshadow a banner year for a stock that vaulted above $3.00 a share for the first time since March of 2006.

3. Medivation (Nasdaq: MDVN)

Market Cap: $1.57 billion

2010 Closing Price: $15.17

2011 Closing Price: $46.11

2011: 204%

Medivation was another biotech stock that made massive gains in November. Medivation, a biopharmaceutical company that develops small molecule drugs for critically ill patients, saw its stock pop after a successful study of its new prostate cancer drug, MDV3100.

Neither Medivation nor Inhibitex is currently profitable. But what each company proved in 2011 is that few things send a stock soaring like developing a possible breakthrough drug. While risky, biotech stocks are appealing because of their potential for astronomically high rewards.

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