The Minor Leaguers (10-25-2021)

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 began rotating it with our flagship bottom-up scan “Under The Hood” earlier this year.

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. But instead of all-time highs, we're sorting by 52-week highs these days as we don't want to discriminate against energy or other cyclical stocks.

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 small-caps are still stuck in the same range they've been in since Q1, mid-caps actually made new all-time highs last week.

After consolidating for about six months, the S&P 400 $MDY is finally resolving higher in the direction of the underlying trend:

In light of all the bullish developments recently, we think it's only a matter of time until small-caps break higher as well.

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.

Since the September selloff, there's been notable relative strength from cyclical groups like energy and financials. 

Speaking of which, just take a look at all the banks that are on this week's list:

All of these stocks made new 52-week highs to close out last week. They’re not just exhibiting impressive relative strength, but they’re also making new highs on an absolute basis.

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

Batter up…