October Small/Mid-Cap Stock Basket: New Trades for Consideration By: Christopher Mistal | October 14, 2021 | Email | Print

This basket is being presented in order to take advantage of the “Best Months” of the year (November through April/June) for stocks. We will look to add these 8 stocks, in the table below, near current levels or on minor dips. Many of the positions did strengthen today and are likely to open at or above the suggested buy limits. We will allocate a hypothetical $2000 from the cash position in the Stock Portfolio to each position. For each stock we have provided the ticker, name, sector, general business description, PE, price-to-sales ratio, market value and a suggested buy limit along with a stop loss. 

 

These 8 stocks all have reasonably solid valuations, revenue and earnings growth. Most also exhibit positive price and volume action as well as other constructive technical and chart pattern indications. The group of 8 covers a broad array of sectors and industries with construction being well represented. For this basket we have elected to focus on the lower end of the market capitalization spectrum. Stocks selected today are a mix of small caps ranging from $50 million to $1billion in market cap along with mid-caps in the $1 to 5 billion range. Late-October and November has historically been a good time to buy small-cap and technology stocks.

 

We first sifted through the universe of nearly 8,000 U.S. traded stocks for those with a market cap of at least $50 million, but no greater than $5 billion and average daily volume of 50,000 shares or more on average over the past twenty trading sessions. Then we winnowed the list down to only those stocks with relatively low price-to-sales and price-to-earnings ratios with a few exceptions. A special nod was given to stocks with a below average number of analysts following them.

 

We then dug into numerous individual company charts before settling on these final 8 stocks. Our underlying theme was to find reasonably priced stocks that appear to be quietly growing sales and earnings while flying somewhat under the radar with only a limited number on The Street paying close attention to them. As market cap goes higher, this becomes increasingly challenging and a history of earnings surprises and future estimates becomes even more important. 

 

At the end of the screening process we were left with a reasonably diverse small/mid-cap basket. Construction is well represented with four stocks, but the remainder of the basket includes medical, transportation, computer technology and consumer related stocks. We did not search specifically for top-performing stocks within any specific sector, this just happens to be what remained after our process. We anticipate performing a similar screen for Large-cap stocks in the near future that should provide another basket of stocks to consider.