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There’s been plenty of drama over the last week, but small caps don’t seem to care. Both the S&P 600 and the Russell 2000 are making new all-time highs.

FactSet reported this morning that the Russell 2000 has outperformed the S&P 500 Index every session this year. That’s impressive. Let’s look more closely at the S&P 600 Index because I have sector data for it. Impressively, through mid-day Thursday, every small-cap sector is outperforming its large-cap counterpart YTD. The strongest small-cap sectors are materials (+14.4%), energy (+13.4%), industrials (+12.3%), and tech (+11.7%). The weakest, utilities, financials and healthcare, are all up in the 4.4% to 5.3% range.

As a whole, the S&P 600 is up 9.2% while the S&P 500 is up just 1.2% YTD.

Here are two companies that fit my screening criteria for undervalued stocks with low volatility.

Current Market Outlook


Just over a week ago, it looked like the market’s intermediate-term trend was going up in smoke as cyclicals cracked and growth stocks remained hit or miss. But, frankly, last week’s action was one of the more impressive few days we’ve seen in a while—most indexes roared back, we saw more stocks (growth and otherwise) pop on excellent volume and even some hard-hit areas rebounded nicely. To be clear, we don’t think the market is out of the woods; many cyclical names still look iffy, and it’s not like there are dozens of great-looking breakouts to sink your teeth into (yet). Thus, we still think picking your spots is important, but it’s also true that we’re seeing more good-looking patterns than we have in a while. We’re nudging up our Market Monitor to a level 7.

This week’s list features many of the names that have seen some persistency and power of late. Our Top Pick is Dynatrace (DT), which appears to be emerging from a big-picture, year-long consolidation.

Stock Name	Price	Buy Range	Loss Limit
Alnylam Pharmaceuticals (ALNY)	166	162.5-167.5	149-152
American Eagle (AEO)	37	35.5-37.5	32-33
CommScope (COMM)	21	20.5-21.5	18.5-19
Deckers Outdoor Corp. (DECK)	382	370-385	340-345
Dynatrace (DT)	60	57-59	51.5-52.5
Natera (NTRA)	117	113-116	102-104
Nutanix (NTNX)	39	37-38.5	32.5-33.5
Shopify (SHOP)	1495	1450-1500	1310-1340
Upwork (UPWK)	57	53.5-56	47-48.5
Vista Outdoor Inc. (VSTO)	45	42-44	37.5-38.5

We think the odds favor the market has found a short-term low (last Monday) amid lots of panic selling, and it’s probably starting to repair the damage from the prior few weeks … but that process is likely to take some time, as the market deals with the tariff and economic uncertainty and as new potential leaders try to round out launching pads. Of course, how the market acts from here will be key, so we’re remaining flexible, but we always advise going with what’s in front of us, and right now the odds favor more patience will likely be needed before a sustained advance can develop. We’ll leave our Market Monitor at a level 3.

As the correction has gone on, it’s become easier to spot the names that are resisting the decline. Our Top Pick is a newer name to most and it’s shown accelerating accumulation the past three weeks.

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