This post is one in a series in which over 50 newsletter advisors share their Top Picks for 2012.

By Jim Oberweis, Jr., The Oberweis Report

For a play on healthcare reform in this country, HMS Holdings (HMSY) is a small cap to own. The company provides cost-containment services for state Medicaid programs and other third-party payors by ridding the system of fraud and errors. 

Healthcare reform should expand the number of Medicaid-covered lives significantly, from 57 million to over 80 million by 2019, with estimated spending more than doubling over that same time period.

Another result of healthcare reform is the requirement that states establish Medicaid Recovery Audit Contractor (RAC) programs to identify and recover overpayments. 

With several RAC contracts under its belt, management expects the company to win at least 50% of these eligible engagements. 

The majority of revenues are contingency-based, thus allowing HMS to charge little or no up-front costs (which is quite compelling in this economy), while being motivated to save customers as much money as possible. 

Most contracts are multiyear commitments whereby HMS gets paid a percentage of the money saved. HMS grew earnings over 30% in the latest reported quarter, and we expect the company to grow revenues by more than 30% over the next 12 months. 

HMS has an impressive track record of entering new and faster-growing markets, with two recent acquisitions positioning it in the lucrative yet nascent market for dependent eligibility services. Here, the company audits client data on a fee-for-service basis to ensure that dependents enrolling for employer-sponsored health care are indeed eligible to receive subsidies. 

With many growth-story stocks disappointing investors, this diamond in the rough should be on your radar.

Steven Halpern's TheStockAdvisors.com​​​ offers a free daily review of the favorite stock ideas of the nation's top financial newsletter advisors.