Welcome back to Under the Hood, where we'll cover all the action for the week ended November 11, 2023. This report is published bi-weekly and rotated with The Minor Leaguers.
What we do here is analyze the most popular stocks during the week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.
We use a variety of sources to generate the list of most popular names.
There are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: a list of stocks seeing an unusual increase in investor interest.
From the Desk of Steve Strazza @sstrazza and Alfonso Depablos @Alfcharts
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.
Our International Hall of Famers list is composed of the 100 largest US-listed international stocks, or ADRs.
We've also sprinkled in some of the largest ADRs from countries that did not make the market cap cut.
These stocks range from some well-known mega-cap multinationals such as Toyota Motor and Royal Dutch Shell to some large-cap global disruptors such as Sea Ltd and Shopify.
It's got all the big names and more–but only those that are based outside the US. You can find all the largest US stocks on our original Hall of Famers list.
The beauty of these scans is really in their simplicity.
We take the largest names each week and then apply technical filters in a way that the strongest stocks with the most momentum rise to the top.
Based on the market environment, we can also flip the scan on its head and filter for weakness.
Let's dive in and take a look at some of the most important stocks from around the world.
Powell supposedly stated the obvious or blurted out what was on everyone’s mind. I don’t know. I haven’t watched the video or reviewed yesterday’s treasury auction.
And I won’t.
I’m more interested in the “what,” not the “why,” as the former has proven far more valuable for navigating markets.
For the longest time, investors in the United States have been rewarded for their home country bias and their overexposure to large-caps and growth stocks.
The secular trend of underperformance from international equities relative to the United States commenced over 15 years ago. Many investors have simply never seen stocks outside the US outperform over any material timeframe.
It's not a matter of impossibility; rather, our recency bias tends to mistake unfamiliarity for the extraordinary.
A regime of sustained value outperformance isn't isolated to the realm of fantasy. It was only last year that holding growth over value was nothing short of opportunity cost, while international equities outpaced their US counterparts through Q4 and into the new year.
Recently, Meb Faber joined us on the morning show, where he discussed the topic of international investing. He argued that this is the best time in history to make the value trade, both domestically and internationally.
We love our bottoms-up scans here at All Star Charts. We tend to get really creative when making new universes as we want to be sure they will deliver us the best opportunities the market has to offer.
However, when it comes to our latest project, it couldn't be any simpler!
With the goal of finding more bullish setups, we have decided to expand one of our favorite scans and broaden our regular coverage of the largest US stocks.
Welcome to The Junior Hall of Famers.
This scan is composed of the next 150 largest stocks by market cap, those that come after the top 150 and are thus covered by the Hall of Famers universe. Many of these names will someday graduate and join our original Hall Of Famers list. The idea here is to catch these big trends as early on as possible.
There is no need to overcomplicate things. Market cap is a quality filter at the end of the day. It only grows if the price is rising. That's good enough for us.
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.
In the 16 months since we launched the All Star Charts Paid-to-Play options service, subscribers have enjoyed positive risk-adjusted returns with far less volatility and smaller drawdowns than a simple investment in the S&P 500. They've also learned how to execute our strategies to produce incredible outperformance versus comparable ETF benchmarks that seek to sell options premium.
But one thing we can all agree on is that we wish it could be simpler.
In an effort to simplify your trading lives, we'll begin presenting our daily trades and open positions in an easier format!
Instead of receiving numerous emails throughout the day alerting you to actions in the portfolio and producing repetitive videos that few of you are watching (we have the viewership data!), we're going to send you ONE DAILY DIGEST that packs far more punch.
