Volume Breakdown Report: July 2, 2022


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Last week saw another major sell-off on Wall Street. As a result, I found only four new selections of my quantitative sorting formulas to quickly discuss for next week’s trading.

This is the second issue of VBR. So here’s a brief description of what I’m trying to accomplish for readers. Wall Street has an old saying – volume precedes price. The idea is that large investors and insiders quietly try to buy stocks before a price breakout. The VBR is essentially a starting point for individual investors, who may not have access to quantitative sorting technology and databases. Stocks are included using a specific set of positive momentum characteristic formulas that I have developed over many years in conjunction with high volume days on short uptrend price term. My proprietary formulas include up to 15 different technical trading indicators analyzed daily against a computer database of over 4,000 stocks.

Review of the week

The first list of six stock picks made on June 25, 2022 performed here in respectable fashion over five trading days. Four out of six “outperformed” the market decline. At equal weight, the group held up better than large caps SPDR S&P 500 ETF (SPY) -2.28% slippage or small cap iShares Russell 2000 ETF (IWM) down -2.06%. Over the week, the VBR listing fell a slight -0.13% in price for an average average return, measured from Friday-Friday closing values. That loss was significantly lower than major Wall Street indexes.

The biggest winners were Del Monte Fresh Produce (PDF), LGL Group (LGL) and Nathan is famous (NATH), two food companies and a cash-rich manufacturer are seeing more defensive demand from investors. The main losers were Li-Auto (LI), which announced a $2 billion stock offering, and Cyanotech (CYAN). I repeat, this week’s action does not tell me with any real statistical predictive certainty what will happen next week. But it’s entirely possible that this first group of six will outperform the market again in early July, by how much, I can’t know. Often a big winner brings the whole list to decent payouts.

YCharts by SA

Y-Charts

My research and trading experience hasn’t been much different for returns over the years. High volume breakouts were able to consistently beat the market by varying margins over 6-8 week periods. After that, individual stories take over, with some picks falling back or even sliding lower than when high-volume interest surfaced. Others begin to behave like the general market. And still others are chasing streaks of strong “relative” gains. If I could figure out who the big winners would be, I would now be a commercial billionaire. But this is not the case. My research is simply to increase the chances of short-term success.

New buy signals

During Wall Street bull markets, I may have ten or more strong accumulation patterns to present. However, weak market direction in June is not the best environment to find aggressive buying above selling pressure. Below are the most interesting configurations that my formulas have discovered/suggested for further research.

sanmina

An interesting choice with an underestimated hard asset value is sanmina (SANM). The company is a provider of integrated manufacturing solutions, components, products, repair, logistics and aftermarket services. Sanmina offers these offerings to OEMs in the industrial, medical, defence/aerospace, automotive, communications network, and cloud server industries. The valuation story: 9x EPS, 10x free cash flow, trading close to tangible book value (after adjusting property and land values ​​held for decades, using market price pricing market compared to cost accounting). Conservative finances are present, with more cash on the balance sheet than debt.

StockCharts.com

StockCharts.com

Connection to resources

Global Professionals, Workgroup, and Sitrick Resources are the main trade names used by Connection to resources (RGP). It is essentially a business consulting firm that focuses on public relations, staffing, project management, and crisis monitoring. Bullish Seeking Alpha Quant score…

Table SA

RGP – Chasing Alpha Quant Rank – July 1, 2022

This name has been a regular performer over the past 12 months, appearing on my top momentum/accumulation screens multiple times. The VBR buy signal in June is perhaps the strongest yet. Fundamental value: 12x estimated forward earnings (10x rolling), dividend yield of 2.8%. RGP has a desirable balance sheet with more cash and current assets than total liabilities.

StockCharts.com

StockCharts.com

Kelly Services

A slower economy could bring a more competitive job market, where placement teams of employees like Kelly Services (KELYA) (KELYB) might see better demand/price for their work. Valued at 70% of tangible book value, with a strong balance sheet possessing more cash and current assets than total liabilities. Kelly is trading at low multiples of 10x projected EPS for 2022 and 7x for 2023. Liquid working capital of $16 per share versus $19 is hard to come by. Serious recovery potential for investors after years of stagnation. Top 10% Quant Rank by Seeking Alpha computer model to create bullish momentum.

StockCharts.com

StockCharts.com

Medical ShockWave

A high-growth choice experiencing a massive increase in sales and revenue in 2022, Medical ShockWave (SWAV) doesn’t have the usual low valuation on tracking results that I like to find. However, business momentum statistics in June are overwhelmingly positive, and robust business growth rates during recessions are rare.

Table SA

SWAV – Seeking Alpha, Consensus Estimates – July 1, 2022

SWAV is a medical device company engaged in the development and commercialization of breakthrough intravascular lithotripsy technology for the treatment of calcified plaque in patients with peripheral vascular, coronary vascular and heart valve disease worldwide. Broad earnings “beat” the past 4 quarters is part of the bullish argument.

StockCharts.com

StockCharts.com

Final Thoughts

I suggest readers make an effort to do more in-depth research on any of the selections that interest you, based on your risk appetite or sector exposure needs in portfolio construction. Please understand that small cap selections should be a limited part of portfolio design. Owning a diverse number of stocks is the smartest, risk-adjusted way to play them. Volatile price swings are part of the Wall Street small business investment process. Please consider using pre-placed stop-loss sell orders to reduce the downside potential of individual names. Depending on your risk tolerance, stop levels of 10% to 30% are recommended.

Thanks for reading. Please consider this article as a first step in your due diligence process. It is recommended to consult a registered and experienced investment adviser before carrying out any transaction.

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