Four weeks ago, when IBD’s current outlook for stocks flashed the red-flag signal of “market in correction,” the IBD 50 saw the entrance of some top growth stocks that also weigh in as true heavyweights in market cap.
In the IBD Weekly for the week of Oct. 15, Apple (AAPL), UnitedHealth Group (UNH), Netflix (NFLX) and Illumina (ILMN) made the list, ranking No. 31, No. 39, No. 17 and No. 9, respectively. The combined market cap for the quartet: a hefty $1.45 trillion.
One might have expected the IBD 50 to become more like the IBD Big Cap 20. One reason: The Nasdaq and small-cap equity indexes fell much harder off their highs than the 30-stock Dow Jones industrials.
So, how does the IBD 50 look today, in light of a fresh follow-through day on Wednesday and signs that a true new confirmed uptrend is in place? Is the growth-stock kingdom being run by companies with the girth of some famous kings who loved to eat?
The four companies mentioned above remain on the list. Plus, Intel (INTC) (market value of $223 billion, forming a new base) and TJX Cos. (TJX) ($34 billion, forming a flat base, in a solid uptrend since a big breakout on Feb. 28) have joined the ring. Their presence boosts the average market value of companies in the IBD 50 to $43 billion. That compares well with blue chips in the Dow Jones industrials.
Top Growth Stocks: Big And Small
But as many IBD readers learned in math or statistics classes, it pays to look beyond the mean values. The median market value within the IBD 50 through Wednesday’s close is $6.5 billion.
In other words, the typical top-ranking growth stock on Wall Street is not as big as a member of the FANG, FAANG or FAAMG class. Rather, it has the dimensions of a midcap company. And this is good news for the economy and for stock investors. Why?
Smaller companies tend to show more sensitivity to economic cycles. Yet even if some market pundits are predicting slower global economic growth, the best growth companies meet the L in the IBD CAN SLIM paradigm. The L stands for leaders, who find a way to expand their markets with excellent new products, make top-notch decisions, and keep their pricing strong and their costs down.
Top Performers On Wall Street: Many Market Caps In The Middle
Looking more deeply into the list, 18 of the IBD 50 names show a market cap of less than $5 billion. Sixteen hold a market cap of $15 billion or more. (The minimum market value for IBD Big Cap 20 firms is $15 billion.) So the remaining 16 stocks show market values between $5 billion and $15 billion. It would make sense to think that a company of such size with superior earnings and revenue growth would have the potential to increase its market cap.
The IBD 50 mini charts show a stock’s float, or the number of shares freely traded in the exchanges. To calculate the market cap yourself, multiply the total diluted shares outstanding by the current share price. In some cases, the float and the shares outstanding are very close. MarketSmith carries both figures at the top of each weekly stock chart.
Lululemon (LULU) may be a good example. The longtime IBD Leaderboard name shows a 91 EPS Rating, fifth best within IBD’s apparel manufacturing industry group, according to IBD Stock Checkup. A new base is forming.
The Vancouver-based innovator in athletic and athleisure clothing has accelerated its earnings gains the past two years (up 15% in fiscal 2017, up 21% in fiscal 2018 ended in January of this year). The Street sees profits rising 39% in FY 2019 and up 18% in FY 2020.
You can trade the IBD 50 in a single transaction with the Innovator Capital Management IBD 50 ETF (FFTY). Please follow David Saito-Chung on Twitter at @IBD_DChung.
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