Investors in small stocks face a daunting challenge. They can swim downstream with a tiny group of companies enjoying rapid earnings growth and nose-bleeding val­uations, or switch to struggling stocks that will benefit as the corporate profit tide turns.

Logic suggests taking profits in star small companies and rotating into better-value stocks that have a sniff of faster earnings growth. But the latest batch of half-year profit reports again confirm the strongest small and mid cap companies are getting stronger.