Small-cap stocks have come to the forefront this month, says MoneyShow’s Tom Aspray, who has two names with strong charts and positive revenue growth that he likes for new purchases on the current pullback.
September has been a strong month for small-cap stocks, as the iShares Russell 2000 Index Fund (IWM) has risen 5.2%. The all-time highs from May 2011 have been slightly exceeded.
The relative performance analysis for the past year has favored the large-cap Spyder Trust (SPY) over the small-cap IWM. But this has now changed, and typically a shift in the RS analysis in favor of small caps lasts for three to four months or more.
Tracking a basket of stocks based on their revenue instead of their capitalization is a relatively new approach. RevenueShares introduced its first three revenue-tracking ETFs in 2008, with the rationale that revenue is more difficult to manipulate than net income.
Both their large-cap and small-cap revenue ETFs are now leading the market higher, and these two small-cap high-revenue stocks have just broken out.
Chart Analysis: The RevenueShares Large Cap ETF (RWL) is a relatively small ($150 million) and rather thin ETF with three-month average volume of 24,000. This is way too thin for me to recommend, but it gives an interesting perspective on high-revenue, high-cap stocks.
The RevenueShares Small Cap ETF (RWJ) is also small ($114 million) and has fairly low volume. The weekly chart shows that it has also broken through long-term resistance (line e).
NEXT: 2 Stocks with Revenue in the Bag