The Minor Leaguers (09-27-2021)

From the desk of Steve Strazza @Sstrazza

Welcome to our latest “Minor Leaguers” report.

We’ve already had some great trades come out of this small-cap-focused column since we launched it late last year and started rotating it with our flagship bottoms-up scan, “Under The Hood.”

We recently decided to expand our universe to include some mid-caps….

For about a year now, we’ve focused only on Russell 2000 stocks with a market cap between $1 and $2B. That was fun, but we think it’s time we branch out a bit and allow some new stocks to find their way onto our list.

The way we’re doing this is simple…

To make the cut for our new Minor Leaguers list, a company must have a market cap between $1 and $4B. And it doesn’t have to be a Russell component–it can be any US-listed equity. With participation expanding around the globe, we want all those ADRs in our universe. 

The same price and liquidity filters are applied. Then, as always, we sort by proximity to new highs in order to focus on the best players. Nothing new there.

The goal is still to catch the strongest names while they’re small and have serious upside potential. If any of these stocks ever climb the ranks to the big leagues, the returns could be huge. We’re looking at up to 10x moves just to break into large-cap land!

Let’s dive into this week’s report and see what’s happening in some of the hottest stocks in the Minor Leagues.

While the primary uptrend is intact for SMIDs, we’re still trading right where we’ve been since Q1. The Russell 2000 $IWM remains a trendless mess, and the same is true for the S&P Mid-Cap 400.

Here’s a look at the current continuation pattern in IWM, with price still chopping around the middle of its range:

Until we get a resolution, there’s no directional bias at the index level for the foreseeable future. As long as this is the case, we want to pick our spots selectively and not force longs.

Regardless of the market environment, winners will always come out of this universe. And when we go through a corrective phase, as we have been for much of this year, it can give us valuable insight into which stocks are likely to be leaders once the selling pressure alleviates.

For this reason, we embrace times like these and use them to prepare for when the market inevitably begins trending again. And we have a sneaking suspicion that time could be coming sooner rather than later...

Let’s take a look at this week’s top players who have been bucking the trend through this volatile environment:

Since we sort our list by proximity to all-time highs, the names toward the top are potential future leaders. They’re not just exhibiting impressive relative strength. They’re also making new highs on an absolute basis.

With that as our backdrop, let’s take the field and highlight this week’s top players!

Batter up…