WW featured expert Kevin Matras highlights: Wabash National, Luxfer Holdings, Rose Rock Midstream, Neff and Weight Watchers

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For Immediate Release

Chicago, IL - June 01, 2016 - Stocks in this week's article include: Wabash National ( WNC ), Luxfer Holdings ( LXFR ), Rose Rock Midstream ( RRMS ), Neff Corp. ( NEFF ) and Weight Watchers ( WTW ) . Kevin Matras screens for companies showing their 'first' profit, and explains why they are ones to watch.

Screen of the Week written by Kevin Matras of Zacks Investment Research:

The Small-Cap Growth Screen Beating the Market Big-Time

When most people think of aggressive growth strategies, one of the first things that come to mind is small-cap stocks. Indeed, when I'm searching for aggressive growth stocks, I'll usually get plenty of small-cap stocks coming through regardless of whether I'm specifically looking for them or not.

One of the reasons why small-cap stocks are so closely associated with aggressive growth is because they are typically newer companies in the early part of their growth cycle. And historically, that's when a company grows the fastest.

Of course, not all aggressive growth stocks are small-caps. There are plenty of mid-caps and large-caps that fall into this category too. Especially if a company that has been in existence for a while comes up with a new product or service and is lighting sales on fire. You may see some spectacular growth rates from these as well.

But, for this screen I set out to create an aggressive growth strategy that only focuses on small-caps. And the results were amazing.


Market-Cap less than or equal to $1 Billion

This is the stock price multiplied by the number of shares outstanding. The definition of what a small-cap stock or large-cap stock is seems to change every so often as the market changes. For now however, the generally agreed upon definition is as follows:

Small-Cap less than or equal to $1 Billion

Mid-Cap greater than $1 Billion and less than or equal to $5 Billion

Large-Cap greater than $5 Billion

Zacks Rank equal to 1

This screen only selects Zacks Rank #1 Strong Buys. Since Zacks Rank 1s have the best performance and a relatively larger selection of small-cap stocks in that group, there was no need to go beyond it for this one.

Price greater than or equal to $1

Even though plenty of small-cap stocks trade at lower prices, we drew the line at penny stocks . Nothing wrong with those, but many penny stocks trade for mere pennies for a reason. Plus, I've found the bid/ask spread on many to be relatively wide (percentage-wise), making them difficult to trade. So they need to be trading at a minimum of $1 to get through.

Average Dollar Trading Volume greater than or equal to $500,000

This is a different way to look at trading volume. Instead of looking at just the number of shares traded, this is looking at the number of dollars traded, i.e., the amount of money changing hands each day. For example: if a stock was trading at $1, but had an average trading volume of 500,000 shares, its dollar volume would be $500,000 and it would mean that $500,000 worth of shares trade in and out of the stock each day. And that's the bare minimum for this screen.

Estimated One Year EPS Growth greater than or equal to 1.20 * the X (Expanded) Industry Median, but less than or equal to 50%

For this one, we want the stocks to be projecting growth rates at least 20% higher than the median for their respective Industry. But we are excluding stocks with actual growth rates greater than 50%. Why? This is a growth screen isn't it? Yes it is. But we also want to keep the odds of success in our favor. And growth rates that are 'too high' often don't pan out. In my testing I have found that once the growth rate exceeds 50%, returns start to drop. On the occasions where they may tick-up a bit, I normally see an accompanying increase in risk. Below this cut-off is the sweet spot and why it's in the screen.

P/E using F(1) Estimates less than or equal to X Industry Median

We're determining value here by comparing the stock's valuation to that of its Industry. One thing to keep in mind is that often times, small-cap stocks or stocks with aggressive growth will trade at higher valuations than non-aggressive growth stocks. Why? Because many traders are willing to pay a little more for these higher-growth companies now, believing that they will likely be trading at even higher valuations later, if they wait. So, while these stocks might be trading at levels higher than a classic value stock, this item still finds those that are trading at values lower than the median for their peers.

Price/Sales Ratio less than or equal to X Industry Median

Just like the P/E ratio, the P/S industry comparison helps us find the stocks that are still reasonably priced (value-wise) and sometimes downright 'cheap' vs. their peers.

Price/Sales Ratio equal to Bottom # 7

We used the P/S ratio one more time in this screen to narrow the list of stocks down to just the 7 'best', i.e., the 7 best growth stocks with the lowest P/S ratio. (Note, sometimes there are periods when less than 7 stocks qualify. That's OK. But, this screen will never produce more than 7.)


Over the last 16 years (2000 thru 2015), the Small-Cap Growth strategy, using a one-week holding period, showed an average annual return of 64.0%.

And so far in 2016 (thru 5/27/16), it's up 14.3% vs. the market's 3.7%.

Take note, the backtest results above do not include commission costs or fees. A user, of course, will incur transactions costs, so his results will be lower. I point this out so a trader can adopt realistic expectations when deciding if a strategy is right for him.

But, looking at the trajectory of the returns, it's clear that this strategy works and has a high probability of picking winning stocks.


There are 7 new stocks coming thru this screen this week. Here are 5 of them:

( WNC ) Wabash National

( LXFR ) Luxfer Holdings

( RRMS ) Rose Rock Midstream

( NEFF ) Neff Corp.

( WTW ) Weight Watchers

Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.

Click here for your 2 week free trial to the Research Wizard >>

Sign up now for your free trial today and start picking better stocks immediately. And with the backtesting feature, you can test your ideas to see how you can improve your trading in both up markets and down markets. Don't wait for the market to get better before you decide to do better. Start learning how to be a better trader today:

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit for information about the performance numbers displayed in this press release.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

WABASH NATIONAL (WNC): Free Stock Analysis Report

LUXFER HOLDINGS (LXFR): Free Stock Analysis Report

ROSE ROCK MIDST (RRMS): Free Stock Analysis Report

NEFF CORP-A (NEFF): Free Stock Analysis Report

WEIGHT WATCHERS (WTW): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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