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The Best Gifts Come in Small (Stock) Packages

Friday, October 13, 2017

Mike Larson

I just got done telling you how the inaugural picks from our brand new Weiss Ratings’ Under the Radar Stocks service were performing very well. And I’m happy to report that since then, the news got even better!

One of our targeted companies reported very strong comparable store sales growth at its clubs and restaurants – despite short-term closings and other challenges posed by the recent hurricane strikes. Its shares surged more than 8% in a single day, showering our subscribers with even more open gains.

You can get on board with them by clicking here. But even if you aren’t ready to take that step, gains like those underscore how something very important is happening in this market. It’s handsomely rewarding investors who remember what their parents told them around the holidays when they were growing up: The best gifts come in small packages!

Consider the iShares Micro-Cap ETF (IWC, Rated “C+”). This ETF invests in roughly 1,400 companies that are part of the Russell Microcap Index. As the name suggests, those companies have some of the smallest capitalizations in the stock market.

Scroll through the list of top IWC holdings at our website and you’ll find names like Immunomedics (IMMU, Rated “D”) with a market cap of $1.8 billion, Winnebago Industries (WGO, Rated “B”) with a market cap of $1.4 billion, and Dynavax Technologies (DVAX, Rated “D-”) with a market cap of $1.4 billion. The top two holdings in the SPDR S&P 500 ETF (SPY, Rated “B”), Apple (AAPL, Rated “B”) and Microsoft (MSFT, Rated “B+”), have market caps of $805 billion and $588 billion, respectively.

Now look at this IWC chart below. You can see it’s exploding higher – with gains of 9.3% in just the past month! That compares to only 2.7% for the SPY. Other similar ETFs are showing the same kind of outperformance, with the Wilshire Micro-Cap ETF (WMCR, Rated “C+”) up 9.1% and the PowerShares Zacks Micro Cap Portfolio (PZI, Rated “C”) up 8.1%.

It goes without saying that small caps are more volatile than large caps, and that micro caps are even more volatile then both. But I like to see this kind of outperformance because it shows investors are growing more confident in the outlook for U.S. growth.

You can find more evidence of that confidence by looking at the recent breakdown of sector performance. Take a look at this S&P Sector Short-Term Performance Screener I created:

Data Date: 10/11/2017

Over the past month, the Financial Select Sector SPDR Fund (XLF, Rated “B”) is leading the way with a total return of 8%. Next up are other “growthier” ETFs like the Energy Select Sector SPDR Fund (XLE, Rated “C”) at 6.3% and the Industrial Select Sector SPDR Fund (XLI, Rated “B”) at 4.8%. The worst performers are traditionally defensive ETFs that own utilities, REITs, and consumer staples.

Bottom line: As my colleagues Martin D. Weiss and Sean Brodrick have made clear recently, huge debt problems elsewhere in the world are causing capital to fly to U.S. shores and U.S. assets. That’s opening up massive profit opportunities for investors who know where to look, and how to take advantage. Definitely check out the shocking results of the work they’ve done here.

Meanwhile, my advice remains the same as it’s been for months: Stay focused on growthier sectors, attractive higher-yielding stocks, bonds with greater credit risk, and companies off the beaten path that have compelling stories to tell. The proof that they’re working best is in the profit figures and charts I shared with you today.

Until next time,

Mike Larson

 


Mike Larson, Senior Analyst

ETF Spotlight Edition, by Mike Larson, Senior Analyst

Mike Larson is a Senior Analyst for Weiss Ratings. A graduate of Boston University, Mike Larson formerly worked at Bankrate.com and Bloomberg News, and is regularly featured on CNBC, CNN, Fox Business News and Bloomberg Television as well as many national radio programs. Due to the astonishing accuracy of his forecasts and warnings, Mike Larson is often quoted by the Washington Post, Chicago Tribune, As-sociated Press, Reuters, CNNMoney and many others.

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