Jenna
Every time someone at AAII ignores the DNR we members requested, someone decides to "recussitate" the Wagner screen.
I read the "updated" write-up and download the current tables and ... then ... I remember the dozen reasons why I this screen needs significant improvement to be practical tool.
The AAII "emulation" of Wagner's approach doesn't screen on about half of the criteria described in the writeups. It only screens on about a dozen financial factors / ratios computed from the balance sheet that can be compared and benchmarked to industry peer data.
It completely ignores the many other [50% of Wagner's] criteria that Wanger says he used to understand the "soft" market indicators that form the basis of most of his "beliefs" that he says he used to identify id an exploitable niche exists and has potential to be developed.
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Headline Message : I do not see any improvements in the materials that describe the Wagner (Rev) Screen.
I suspect these gaps are what prompted your post.
I maintain a file with EVERY VERSION of the Wagner (Rev) screen AAI has published since I joined AAII.
I can tell that the Wagner screen write up needs to be better organized and the mechanics of each screen steps need to be reviewed to explained in more detail how each screening step contributes to the overall goal.
Maybe this overview is a clue to why the Wagner Screen has not attracted more users.
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Now on to my attempt to answer your 2 questions
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�� What are examples of niche market leaders you believe fit that mold today?
A niche is subset of a market. In between are market segments of various sizes. The Dept of Commerce defines, classifies, and provides codes for overall markets, industries, and segments, but does not define niches.
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Background Information
The North American Industry Classification System (NAICS) covers the 3 NAFTA: CAN, Us and MEX. NAICS classification is based on a the types of inputs, production processes, and or products/services grouped into INDUSTRIES by the similarity of the processes used to produce goods or services. NAICS is a 6-digit hierarchical coding system. Digits 1 &2 designate a SECTOR that represents general categories of economic activities; digit 3 designates the SUB-SECTOR; digit 4 designates the INDUSTRY GROUP, digit 5 designates the NAICS INDUSTRY, and 6 designates the national industry.
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�� How do you evaluate a niche has staying power vs being too narrow or vulnerable to disruption?
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There is a lot of formation out there on this topic. Wagner had his own personal model on how to do this, but the AAII description glosses over specific indicators he used. He may not have distilled them into a systematic model. Many "gurus" skip this step.
NAICS descriptions and codes can help identify and compare size and scope of niches.
Tracking the flow of inputs (suppliers), production equipment (processes), and products/services (outputs) through a company. This can get complicated.
In 2004 Pat Dorsry, Director of Stock Analysis at Morningstar, compiled and published a book – "The 5 Rules for Successful Stock Investing" -- that explained how to analyze industries systematically. Page 42 has a generalized model of how business transform investments into profits and how this produces cash flows. MORN used to give it away to new customers but I don't know it they still do. I also think it may be out of data. Pages 187-348 outlines how 17 "industries" use the model to make money.
You can buy one through a discount bookseller doe bout $70 .. OR form AMZN.com for about $20.
NOTE"
AMZN is a great example of a "niche" company that became successful enough to be accused on monopolistic practices by a prior Secretary of Commerce.
BRK is the paragon of a successful "niche" company . It started as a furniture company and transmogrified into a financial behemoth, that is so diversified that it could be used as benchmark "index" like the SPX500.
Don't forget that NVDA, AAPL, MSFT, and
AMZN –the 4 largest companies in the word -- ALL started as niche companies 50 years ago.
NVDA designed semiconductors.
APPL stated as a PC manufacturer.
MSFT as a software operating system [MS DOS in 1980] company that transformed into the largest seller of internet phones.
Harvard Business School professor Clayton Christensen's 1997 book, "The Innovator's Dilemma" holds that established companies, acting rationally and carefully to stay on top, leave themselves vulnerable to upstarts who find ways to do things more cheaply, often with a new technology. His most famous example was Digital Equipment Corp (DEC) that introduced cheaper computing power through its PDP-11 mini-computer series to take market share form IBM. DEC was later "disputed" by MSFT and AAPL PCs which were later disrupted by Internet browsers later disrupted by portable phone. This cycle is not over.
| Chewy | cheap, high-quality pet food for time-strapped pet owners) |
| Volvo Trucks | precision-engineered trucks) |
| Throx | socks for younger consumers) |
| Blackbaud | software for non-profits) |
| CD Projekt | retro games for older gamers) |
| Under Armour | base layers for athletes who eschew sweat-soaked clothing) |
| Glorious Gaming | custom PC peripherals for PC builders) |
| Diapers.com | convenient diaper ordering/delivery for infants/toddlers) |
| Nomatic | luggage for digital nomads) |
| Lush | ethical cosmetics for consumers with a conscience) |
| L.A.B. Golf | premium putters for golfers prepared to pay for top quality) |
| Spektrum Glasses | blue light reducing glasses for people with a lot of screen time |
| Fitbunch | fitness coaching for amputees) |
| Lefty's | supplies n' stuff for left-handers) |
| The Pink Moon | stylish and affordable plus size clothing) |
| Bonobos | perfectly fit online pants (and now clothes) store for men) |
| Powell's City of Books | print literature) |
| Lehman's | the Amish) |
| Brevo | relationship marketing originally in French) |
| Razer | console controller attachment for mobile gamers) |
There several dozen other sites with similar lists, but the Wagner screen requires $2 Billion capitalization.
This brings up the point that today's market attracts thousands of internet businesses. AMZN.com has sever thousand sellers that it supports with advertising, selling, collecting, money management, logistics, and delivery.
This brings full circle.
Regards,
Original Message:
Sent: 11/4/2025 4:43:00 PM
From: Jenna Brashear
Subject: Identifying Durable "Niche" Leaders with the Wanger (Revised) Screen
Ralph Wanger believed that finding success in small-cap investing isn't about chasing the hottest industries ... it's about uncovering hidden leaders operating in the shadows of bigger players. As he famously put it, "It's better to own the best company in a marginal industry than the third runner-up in a major one."
In today's market, that philosophy of the Wanger (Revised) Screen still holds weight. Many of the most resilient companies are those quietly dominating their corner of the world, whether it's a component manufacturer with a lock on a specialized technology, a regional service provider with unbeatable customer relationships, or a software firm solving a problem too specific for giants to bother with.
So let's explore this idea together:
👉 What are examples of niche market leaders you believe fit that mold today?
👉 How do you evaluate when a niche has staying power versus being too narrow or vulnerable to disruption?
If you haven't reviewed the Wanger (Revised) stock screen, it's worth a look. It highlights companies with strong financial footing, reasonable valuations, and consistent operating strength, exactly the traits Wanger prized when searching for those "zebra" opportunities outside the herd.
Take a moment to explore the screen and share your take. What do today's enduring niche leaders look like to you?
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Jenna Brashear
AAII Community Manager
Chicago, IL
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