Small Irish stocks, often overlooked by large investors, may be among the star performers in the next year because of their exposure to growth markets such as outsourced services, Goodbody has forecast.

The stockbroking firm named CPL Resources, Horizon Technology and Newcourt Group as its top three stocks for next year.

Goodbody chose the stocks from 23 companies with a market capitalisation of less than 100 million, which it defined as microcap stocks.

"While these stocks often fall under the radar screen of institutional investors, ignoring them has resulted in a number of missed opportunities," Goodbody wrote in a report.

One third of the 23 stocks analysed have more than doubled their total shareholder return since 2002.

The return on Unidare and CPL Resources has risen more than sixfold over the period.

Irish microcaps are ignored not only because of their size, but because the companies often are not covered by analysts.

They have volatile earnings, are not traded very often, or have short track records, according to Goodbody.

The firm chose CPL, a provider of temporary and contract staff, because it is likely to continue to benefit from an expanding Irish labour market.

Indeed, the recruiter said yesterday it expected "strong" pretax profit for the six months ended December 31st.

Goodbody predicted that CPL shares may rise at least 16 per cent in the next 12 months.

Horizon Technology, an IT distribution company, will probably be able to maintain "good earnings growth" for the foreseeable future and its share price is trading at a discount to its peers, Goodbody analysts pointed out.

Shares of outsourced services firm Newcourt Group offer investors a "good pure play" on domestic economic growth because of its involvement in the expanding markets of security services and recruitment, according to Goodbody.