After a difficult 2008, the past year was pretty fruitful for small-cap stocks. The TSX Small Cap and Venture indices rose 59% and 67%, respectively, compared to a 33% gain for the TSX composite.

Wellington West Capital Markets has revealed the ten stocks (from five sectors) that its analysts expect will outperform in 2010.

In 2009, the firm’s top performers were Alliance Grain Traders Inc. AGT (+239%), Lake Shore Gold Corp. LSG (+213%) and Sa Gold Corp. SGR-V (+181%). Five of its nine picks beat the best of comparitive indices and its top selections averaged a 98.5% total return.

Here are Wellington’s selections for 2010 and some of the reasons why.

Hemisphere GPS Inc. (HEM/TSX)
The designer, developer and manufacturer of precision GPS devices is a leader in agriculture equipment and has an eye to growth. It is developing sales channel into China and now India, while also launching new products. This suggests strong sales growth potential in coming years.

Bellatrix Exploration Ltd. (BXE/TSX)
Led by a new management team, the emerging oil and gas company offers investors deep resource play inventory in emerging Cardium (oil) and Notikewin (gas) locations. Its recent well tests exceeded expectations.

Essential Energy Services (ESN.UN/TSX)
The operator of a diversified fleet of oilfield services is expected to benefit from a significant rebound in activity this year. After a 60% decline in North American drilling rigs, anticipated gas supply reductions in 2010 should spur higher prices and a rebound in service spending.

Second Wave Petroleum Inc. (SCS/TSX-V)
Regional mapping for the Calgary-based junior underpins huge resource potential at its Judy Creek property, while initial well performance suggests strong economics. The company offers predictable growth in production and reserves from known pools.

Sterling Resources Ltd. (SLG/TSX-V)
Sterling is an exploration and production company with assets in the United Kingdom, Romania and France. Its Cladhan oil well in the North Sea, where drilling is expected to begin as soon as May, is considered a “game changer.”
The company’s asset portfolio is also considered to offer considerable upside.

Anatolia Minerals Development (ANO/TSX)
The Colorado-based miner, focused on exploration and development in Turkey, is expected to see two key events in 2010. These are a production re-rating and exploration growth. Average annual attributable production in 2012 is forecast to be more than 131,100 ounces of gold and 104,200 ounce of byproduct silver.

Copper Mountain Mining (CUM/TSX)
The company, which is focused on advancing the 75%-owned project in south-central British Columbia remains cheap relative to its peers. This is particularly true given that Copper Mountain is among the most advanced near-term development projects with financing, permitting and off-take deals already set.
Higher copper price futures also bode well for the company.

Kirkland Lake Gold (KGI/TSX)
After spending more than a year in the “cocoon of infrastructure improvements” operating results are poised to improve in calendar 2010, which should prove to be a transformational year for Kirkland Lake.

Taseko Mines Ltd. (TKO/TSX)
Recent copper-gold deals bode well for the company’s Prosperity project, located 175km from Gibraltar, and for Taseko as a whole. This large copper-gold deposit with 2P reserves of 11 million ounces of gold and 4.2 billion pounds of copper, could be a game-changer as miners covet such assets.

Wi-LAN (WIN/TSX)
While management has successfully signed more than 200 licensees to-date, essential patent holder Wi-LAN could see a catalyst for multiple new deals with the Markman hearing in March.

Jonathan Ratner