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.
We’re back to a key level of interest for Small-caps on an absolute basis. And we’re back down to historic levels relative to Large-caps. The chart tells a very powerful story.
I’m a buyer down here.
If the Russell2000 is above last Summer’s lows, I will be long the $IWM ETF. I also think there will be plenty of opportunities this summer in small-cap stocks.
We talked about $IWM internally this morning and I suggested a good, levered way to play this thesis while honoring a nearby risk management level that will get us out of the trade without much pain if we're wrong.
Is that because I’m a trader? Or am I a trader because I make quick decisions?
Over time, I think I’ve come to the conclusion that being a trader has instilled in me a knack and preference for quick decision-making. I wasn’t always like this. 25 years of trading has taught me to work with only 75% of the information I might want, and that is good enough to take action.
The phrase “invest, then investigate,” as Stanley Druckenmiller said, comes to mind.
Outside of trading, this can also affect my day-to-day decision-making. I think it frustrates my wife when I make decisions so quickly. In her mind, she probably thinks I’m being irrational, emotional, or acting on impulse. She, in contrast, is very deliberate. Cautious. Analyzes every detail…
The US Dollar Index $DXY is clinging to the 100 level, refusing to let go despite new 52-week highs for the British pound and a steady rise in the euro.
