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.
The latest Quarterly Playbook is out, which has given us a bunch of ideas to begin exploring.
One idea stood out for me in particular because of a recent pullback offering a good entry point. It's in a bellwether dividend-paying stock that we wouldn't mind owning for the long term, but we're going to take advantage of elevated options premiums to leverage into a high-probability bet for some opportunistic income.
Investors have a lot of questions right now. With sentiment and at some of the most pessimistic levels in history, what will it take for some of these trends to change in the second half of the year? I believe some major trends are already changing.
The Playbook takes a step back and looks at things from a more Structural perspective. If you're specifically looking for more tactical opportunities, you can check out this week's Live Mid-Month Conference Call.
Here's what we'll be discussing in our Q3 Playbook:
The US dollar and interest rates are still two of the most important charts out there. You’re probably tired of hearing it, but their future direction impacts the entire marketplace.
And, believe it or not, the currency market provides a great read on both.
Bullish data points continue to roll in left and right, supporting dollar strength. From the Korean won and Singaporean dollar to the euro and the pound, the dollar seems to break out against another currency every few days.
When we evaluate the trends in emerging market commodity currencies, it reveals insight into the recent rise in interest rates. Instead of showing strength, these currencies are catching lower -- which doesn’t jibe with a rising rate environment.
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.
We also weed out hedging activity and ensure there are no offsetting trades that either neutralize or cap the risk on these unusual options trades.
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, a company must have a market cap between $1 and $4B.
