As many of you know, something we've been working on internally is using various bottom-up tools and scans to complement our top-down approach.
It's really been working for us!
One way we're doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small- to mid- to large- and, ultimately, to mega-cap status (over $200B).
Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.
But the scan doesn't just end there.
We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.
It's a new year. But does that mean we need to see new trends?
Well I think we're definitely going to see new trends emerging. But I have a strong suspicion that a lot of the old trends will remain in place as well.
If you recall, back in July we were looking at a bunch of the leading groups running into their former highs from late 2021.
These groups included Industrials, Semiconductors, Homebuilders and Mega-cap Technology.
We've had some great trades come out of this small-cap-focused column since we launched it back in 2020 and started rotating it with our flagship bottom-up scan, Under the Hood.
For the first year or so, we focused only on Russell 2000 stocks with a market cap between $1 and $2B.
That was fun, but we wanted to branch out a bit and allow some new stocks to find their way onto our list.
We expanded our universe to include some mid-caps.
To make the cut for our Minor Leaguers list now, a company must have a market cap between $1 and $4B.
From the Desk of Steve Strazza @sstrazza and Alfonso Depablos @Alfcharts
This is one of our favorite bottom-up scans: Follow the Flow.
In this note, we simply create a universe of stocks that experienced the most unusual options activity — either bullish or bearish, but not both.
We utilize options experts, both internally and through our partnership with The TradeXchange. Then, we dig through the level 2 details and do all the work upfront for our clients.
Our goal is to isolate only those options market splashes that represent levered and high-conviction, directional bets.
It was really hard not to make a lot of money last year.
And while the trends for stocks and many other risk assets are certainly up, we want to be identifying what the market will have to do for us to position ourselves much more defensively into the new year.
The first warning of a non-so-great market environment would be a breakdown in the Nasdaq100 and Small-cap Russell2000.
Look at those former highs in QQQ from late 2021. If the Nasdaq100 ETF is below 400, that would put it back below those former highs, increasing the vulnerability for further downside, or even a grind sideways.
Our Hall of Famers list is composed of the 150 largest US-based stocks.
These stocks range from the mega-cap growth behemoths like Apple and Microsoft – with market caps in excess of $2T – to some of the new-age large-cap disruptors such as Moderna, Square, and Snap.
It has all the big names and more.
It doesn’t include ADRs or any stock not domiciled in the US. But don’t worry; we developed a separate universe for that. Click here to check it out.
The Hall of Famers is simple.
We take our list of 150 names and then apply our technical filters so the strongest stocks with the most momentum rise to the top.
Let’s dive right in and check out what these big boys are up to.
