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Small Cap Software: Cost-Efficient Buys

In an economic squeeze, efficiency and cost-savings are on the front burner, and Scott Billeadeau says that makes a couple of small-cap software names especially attractive.

Billeadeau is director of small and mid-cap growth strategies at Fifth Third Asset Management.

His Fifth Third Lifemodel Aggressive Fund is up an average of 9.8 percent per year over the last five years.

"Companies in a slow-growth environment that we're in, and probably will continue to be in for a while, need to look on how they can be more efficient," he said.

Recommendations:

His first pick is Nuance Communications -- and ot might be a play on device-makers like Research in Motion.

"This is the leading provider of speech-to-text, text-to-speech, predictive text technology," he said. "They've finally got processing power up to snuff; pretty soon, people are going to be able to talk to their BlackBerrys, and that will transcribe their e-mail for them. ...Significant productivity savings and cost savings for...end markets."

Billeadeau also likes PROS Holdings.

"They're a price optimization technology," he said. "PROS is the clear leader there, and we're just on...an inflection point for that business."

Disclosures:

Scott Billeadeau owns Nuance Communications and PROS Holdings through his fund.

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