The managers of this fund have a game plan and stick to it. By Jennifer Schonberger, Staff Writer July 22, 2011 Rice Hall James Small Cap Portfolio (symbol RHJMX) has been a leading performer in one of the hottest areas of the market: small-company stocks. (See Can Small-Company Stocks Continue Their Big Rally Up?) The fund, led by its four San Diego–based managers, has climbed the charts by seeking stocks whose potential gains far outweigh potential losses.The managers accomplish their mission by digging up overlooked, fast-growing companies. They want firms that they think can deliver annual earnings gains of 15% to 30% over the next three years and whose price-earnings ratios are below their growth rates, a strategy known as growth at a reasonable price, or GARP. And with just $82 million in assets, the fund is small enough to be able to trade nimbly -- a real edge in the small-cap arena. A key part of the managers’ strategy is identifying stocks that could gain three times as much as they might lose. The managers also establish price targets based on earnings potential; once a stock reaches its target, they dump it, even if the story about the company still sounds good. “We want to prevent the mentality of falling in love with a stock,” says co-manager Cara Thome. Currently, the managers are finding value in health care and staffing. Among their favorites is Questcor Pharmaceuticals, which makes a drug that treats infant seizures, kidney damage and a rare neurological disorder. In the staffing business, they like Monster Worldwide, which owns job Web site Monster.com. Another top pick is technology security company OSI Systems. Follow Jennifer on Twitter or become her fan on Facebook.