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.
On both an absolute and a relative basis, healthcare names continue to perform. I guess the need for quality healthcare is a stronger driver of stock prices than interest rates and global macro? At least for now, that appears to be the case.
One name we've been watching, Cigna $CI, is knocking on the door of a major base breakout.
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.
Our Hall of Famers list is composed of the 150 largest US-based stocks.
These stocks range from the mega-cap growth behemoths like Apple and Microsoft – with market caps in excess of $2T – to some of the new-age large-cap disruptors such as Moderna, Square, and Snap.
It has all the big names and more.
It doesn’t include ADRs or any stock not domiciled in the US. But don’t worry; we developed a separate universe for that which you can check out here.
The Hall of Famers is simple.
We take our list of 150 names and then apply our technical filters so the strongest stocks with the most momentum rise to the top.
Let’s dive right in and check out what these big boys are up to.
From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
So far, 2022 has been a historic year. That theme intensified during the second quarter, which is now in the books.
The bond market is working on one of its worst years on record. The S&P 500 just posted its worst quarterly return since 1970 with the index down more than 16% from January through March.
Bitcoin finished the quarter with its second-worst return in its short history. And now the energy sector – the market’s leader this year – just posted its third-worst monthly return since the 1990s.
The operative words here are “worst” and “return.”
That’s 2022 in a nutshell. The bears are in complete control.
However, one area that has held up through all this is commodities. It was the best-performing asset class in 2021, and it’s the only one to close the first half of 2022 in the green.
Let’s note that the first quarter of 2022 was far different from the second. And before we go running to commodities for safety, let’s put the group’s recent performance in perspective.
No one likes a bear market, except for the bears of course.
They haze the uninitiated, test market veterans, and remind everyone that assets can go to zero.
Not fun for most!
When we take a step back and assess all the data in front of us today, the outlook remains dismal for the overall market.
The New York Stock Exchange and the Nasdaq have posted more new lows than new highs for 31 weeks and counting. Leadership groups carry a defensive tone. Topping patterns continue to resolve lower. Support levels are being ignored and violated. Long story short, it's ugly out here.
And it's not only stocks... Bitcoin just booked its worst month and quarter in over a decade and bonds are having one of their worst years in history.
No wonder investor sentiment is in the dumps. It’s clear we are in the midst of a bear market.
They’ve replaced the comical “stocks only go up” memes with images of the grim reaper coming for our favorite names. Even memes aren’t as funny in a bear market!
