From the Desk of Steve Strazza @Sstrazza
Welcome to our latest Minor Leaguers report.
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, 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 there’s still work to do, it’s a bullish development to see buyers hold above and defend the prior-cycle highs.
Here’s a look at the Russell 2000 $IWM:
The 2018 and 2020 highs represent a major polarity zone. As long as we’re above them the bottoming process is still playing out, and we anticipate a new uptrend to take hold eventually.
However, we should still expect further sideways price action in this environment and will be best served by selecting our spots selectively and not forcing longs.
We want to pay extra close attention to those names exhibiting relative strength through the recent volatility. It’s normal for the strongest stocks during periods of weakness to emerge as leaders when the selling pressure subsides.
Let’s take a look at this week’s table:
*Click to enlarge view
Since we sort our list by proximity to 52-week 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!