I won’t bury the lead here…
There are zero S&P 500 stocks that came up when running my “New Bulls” screen this week.
That could be a source of disappointment for readers who are only interested in buying into stocks from the world’s most popular large-cap index.
But for folks who know outsized market-beating gains can also come from the right selection of smaller, lesser-known stocks … you’ll be happy to read on and see this week’s list of 30 “New Bulls” from outside the S&P 500.
First, though, any comparison between the performance and potential of small-cap stocks versus large-caps deserves some context.
See, a slew of academic studies have well-proven that investors can earn a “premium,” above and beyond the broad market’s return, by investing in smaller companies. But you’d be hard-pressed to believe it if you’ve only been in the markets for the last eight or 10 years.
Here’s a ratio chart of the small-cap Russell 2000 index (IWM) divided by the large-cap S&P 500 (SPY) — when the line goes down, it means small caps are lagging behind large caps … and you can see that’s been the dominant trend since 2014:
However, when we zoom in on that same relative-strength plot, you’ll see that the ratio line hit a low point on April 11, precisely alongside President Trump’s “90-day pause” announcement that ended the sell-off preceding it:
We don’t see the red line surging higher, so we can’t say that small-caps are trouncing large caps, by any means. However, the simple fact that this relationship between small- and large-cap indexes has reached a point of balance is encouraging for investors who fish in the small-cap universe.
I run a small-cap research service called 10X Stocks, where we methodically build a portfolio of stocks that have the potential to rally 10X or higher. And I can say that our careful selection of small-cap stocks has been paying off.
Since that mid-April “90-day pause” announcement that put the small-cap Russell 2000 index back on equal footing with the S&P 500, we’ve seen our stock positions rally 88% … 97% … 113% … 236% … and 313%.
All told, 16 of our 19 positions are up since then, for an average gain (winners and losers) of 66%. That compares quite favorably to the 25% gain from the S&P 500 over the same time.
All this is to say…
While we aren’t yet seeing gangbuster performance by the entire small-cap universe, we are seeing signs that investors are interested in certain small-caps again … and that well-placed investments are handily beating the returns coming from the diversified large-cap space.
So with that in mind, let’s have a look at the list of “New Bulls,” most of which are from the small- and mid-cap categories…
The S&P 500 Isn’t the Only Index…
One crucial thing to remember when using my Green Zone Power Rating system is that investors make the market, and thus, help determine the overall rating of stocks in my system.
Sure, a business might have a rock-solid balance sheet driving its Quality rating up, or its Growth rating is incredible due to massive revenues pouring in (and growing).
However, we also have to consider a stock’s actual price action. It’s why I’ve developed my system with six factors in mind. Who wants to buy into a business with incredibly strong financials if no one else is buying at the same time? That’s a recipe for frustration in your portfolio.
As I shared above, I am happy to report that we have 30 stocks that passed my “New Bulls” screen this week that aren’t currently on the S&P 500 index. That means they just hit a rating of “Bullish” (60+) or “Strong Bullish” (80+) after being rated lower for at least the last month.
These are the stocks with incredible potential as market breadth strengthens and help keep this bull market on the tracks:
As always, if you want to look up any of these stocks to get the full ratings picture, including how each stacks up overall and on my six factors, click here to learn about Green Zone Fortunes and find out how you can join today!
Once you’re in, you can go here to start searching for these or thousands of other tickers.
Have a great rest of your week!
To good profits,
Editor, What My System Says Today