I can't believe I'm saying this, but the fourth quarter is almost here. Crazy how time flies, isn't it? With it comes Q3 earnings season, and hopefully the usual Q4 bullishness that'll pull us into the black this year and stave off a bear market. Like a lot of you guys, I'm optimistic, but not euphoric - we all know how vulnerable the market is after August's meltdown. Anyway, as part of the prep work we do on a regular basis to bring you the information and opinions that help you make the most out of small cap market (you know, the stuff you really can't get anywhere else), we've uncovered one of those budding 'bigger picture' trends you'll want to capitalize on as we head into the last part of the year. You know the ones - the trends the media never talks about until after the fact. No fanfare needed... one of our favorite sectors and market cap groups for the remainder of 2011 is small cap utilities stocks. Yes you read that right - we're digging small cap utilities names for Q4, and we want to make a point of saying so mostly because we know it's a group that nobody ever makes a point of owning. It's just too boring. That doesn't mean it's not a profitable group though. In fact, for 2011 we expect it to outperform the overall market, if only because there are still so many doubters. Let's call a spade a spade. The last twelve months have stunk for the utilities sector. Oh, they've been rocky for all groups, but the utilities names have been at the bottom of the pile most of the time. You may want to take a closer look at the data nobody else is dissecting though. While the overall utility sector has been lousy of late, the small caps WITHIN the sector (which have little influence on the major utility indices and ETFs) have continued to run... and run.... and run. The S&P 600 Small Cap Utility Index hit new multi-YEAR highs in July, and is knocking on the door again right now after last month's pullback. You won't find any major index - and few other sector/market cap groups - that you can say the same about. Folks, while I'm more of a reversal-seeker kind of guy, that sheer relative strength is good-looking no matter what kind of trader you are. Here's the catch: While I like the overall group, this is a case where you'll still want to cherry-pick your stocks simply because the chances of any one company (of any size) in the sector missing earnings estimates is about a 50/50 proposition. In Q2, 13 of the S&P 500's 33 utility names missed estimates, and only 17 of the 33 topped earnings estimates. That's pretty lousy, all things considered, and the same proportions applied further down the company-size scale. What the numbers obscure, however, is that the companies that did well did ridiculously well, and most of them have been doing well for quite some time. While my goal was to tell you about the strength with the small caps in the sector rather than name specific names, I do want to point out a few of those high-performance stocks in the group just to underscore my point. One of them is MGE Energy (MGEE) - a sub-$1.0 billion company that services a big chunk of Wisconsin. To be fair, MGE Energy has fallen short of earnings forecasts as much as it's met or beat them over the past two and a half years. It's also been growing earnings very firmly though [by utility standards], from $2.50 per share last year to an expected $2.82 this year, and well up from 2009's $2.21. In fact, 2009 was the only year in the past six that earnings fell, and that was only a 7% decline. And here's the coolest part of all for any of you ladies and gents that own MGEE shares - the stock's actually reflecting that success by appreciating in value. (Hey, it still happens sometimes.) Another one of these interesting small cap utility names you've probably never heard of is CMS Energy Corp. (CMS), out of Michigan. It's a little bigger at $5.2 billion, but still small enough to satisfy the small cap trader in you. Either way, CMS Energy has topped estimates in 7 of the last 14 quarters, and only missed once. And like MGE Energy, it's been doing that while actually growing the bottom line. Also like MGE, CMS shares have been walking higher since late 2008, shrugging off the bulk of the bearish curveballs the market's been throwing. In fact, CMS Energy Corp. is one of the reasons I decided to change gears a little bit with you today and focus on a bigger-picture tide - it's in a clear breakout move today, reaching new highs and blowing past a prior top. IdaCorp. (IDA) is telling you the same story. This $2.0 billion utility name that services Idaho and Oregon has been about three times as likely to top estimates as it is to fall short (with upside surprises ranging from 7% to 40%), and has been pumping up the bottom line very reliably since 2008. While shares are up sharply today, they still haven't reclaimed all the ground they shouldn't have lost in August. You get the idea - persistently bullish stocks, persistent earnings growth, persistent earnings beats, and bullish leadership from the group today (up 2.0%). It's all falling together, yet there are still few believers... and the fact that nobody else is talking about it yet is the most exciting part of all, since crowded trades don't really do you much good. And these three names are hardly the only worthy small caps in the sector. I know I know - you're still looking to triple your money in an hour by getting in and out of that next great biotech breakthrough. I'm looking for that too. The market's just not doling those kinds of trades out right now though, and going fishing for them isn't going to make it happen. At least this bigger budding trend has legs, and is a higher-octane way than a market index for you to ride any fourth quarter rebound rally. Anyway, just wanted to plant that seed in your head. We'll get back to some aggressive stuff for you tomorrow. If there's a worthy small cap utility name you'd like to share in the meantime though, you can post whatever you want to about it at the site.