Issues
Editorial Note: With the market closed tomorrow, January 9, we’ve bumped up this week’s Issue to today.
At the end of 2024, we were in a “buy now to win tomorrow” type market. Now, we’re in more of a “buy now to win in the coming quarters” type market.
Given this backdrop, our first portfolio addition of the year is a lower-risk, high-quality software company specializing in digital banking solutions. It’s the fastest grower in its space and is on pace to deliver its first full-year profit in 2025.
Like a lot of stocks in both the software and financial arenas, shares of this company have been a little weak lately. I think that’s good – we can step in at a price modestly lower than just a few weeks ago.
At the end of 2024, we were in a “buy now to win tomorrow” type market. Now, we’re in more of a “buy now to win in the coming quarters” type market.
Given this backdrop, our first portfolio addition of the year is a lower-risk, high-quality software company specializing in digital banking solutions. It’s the fastest grower in its space and is on pace to deliver its first full-year profit in 2025.
Like a lot of stocks in both the software and financial arenas, shares of this company have been a little weak lately. I think that’s good – we can step in at a price modestly lower than just a few weeks ago.
Today’s opportunity skews toward the more speculative end of the spectrum, which is part of why I find it so darn enticing.
If you’re interested in a gold miner that also has an angle to help the U.S. produce a critical element, antimony, currently in short supply outside of China, Russia and Tajikistan, none of which are cozying up to the U.S. right now, this is the stock for you.
While we began a position in this stock via yesterday’s Special Bulletin, all the details are inside this month’s Issue.
If you’re interested in a gold miner that also has an angle to help the U.S. produce a critical element, antimony, currently in short supply outside of China, Russia and Tajikistan, none of which are cozying up to the U.S. right now, this is the stock for you.
While we began a position in this stock via yesterday’s Special Bulletin, all the details are inside this month’s Issue.
Today we’re jumping into a small-cap recovery story that appears to be in its early innings. It’s a familiar name, and we’re not the first to jump on it. Bank of America just put out a very bullish note after the company posted a big earnings beat.
But this stock isn’t a consensus buy, far from it. There’s a lot of work to be done before Wall Street jumps on board. That spells opportunity.
I don’t think it’ll be a small-cap stock for long. Because of the crazy week with the election and FOMC meeting we will start with a half-sized position with today’s stock.
But this stock isn’t a consensus buy, far from it. There’s a lot of work to be done before Wall Street jumps on board. That spells opportunity.
I don’t think it’ll be a small-cap stock for long. Because of the crazy week with the election and FOMC meeting we will start with a half-sized position with today’s stock.
Surging data center demand. Electric vehicles. Heat pump HVAC systems. Severe weather events. Hurricanes. Rising sea levels. North Carolina flooding.
This is just a short list of the drivers behind rising electricity demand, the harsh realities of being behind the curve when it comes to global warming, and the resulting push toward energy efficiency and greenhouse gas emission reductions.
Today’s portfolio addition is a small and still-unknown company that helps solve these challenges, moving the country toward a more sustainable, clean-energy future.
I think you’ll find it interesting.
This is just a short list of the drivers behind rising electricity demand, the harsh realities of being behind the curve when it comes to global warming, and the resulting push toward energy efficiency and greenhouse gas emission reductions.
Today’s portfolio addition is a small and still-unknown company that helps solve these challenges, moving the country toward a more sustainable, clean-energy future.
I think you’ll find it interesting.
Everybody is talking about the potential of generative AI. But a lot of organizations haven’t yet organized their digital data in such a way that they can leverage it for AI, let alone protect it once AI applications gain access.
Today, we’re jumping into a steady-growth software company that helps solve this problem.
Today, we’re jumping into a steady-growth software company that helps solve this problem.
Infrastructure has been a hot topic for the last couple of years given passage of a bipartisan bill to finally spruce up the U.S. and try and address climate change.
This month we’re jumping into a pure-play infrastructure company that owns railroads and deep-water ports supporting crude oil and clean fuel shipments, as well as a modern power plant that’s getting tons of calls from AI data centers.
One thing – the company reports quarterly results after the bell today!
This month we’re jumping into a pure-play infrastructure company that owns railroads and deep-water ports supporting crude oil and clean fuel shipments, as well as a modern power plant that’s getting tons of calls from AI data centers.
One thing – the company reports quarterly results after the bell today!
In 2022 new management took the helm of a small, deli-focused food company that was underperforming its potential. Fast forward a couple of years and management is executing an ambitious growth plan, while consumers are flocking to the deli section like never before.
This month’s Issue tells the story of a micro-cap company that’s hitting its stride a century after the woman it’s named after completed the journey from Italy to Brooklyn, NY.
This month’s Issue tells the story of a micro-cap company that’s hitting its stride a century after the woman it’s named after completed the journey from Italy to Brooklyn, NY.
In 2000 a small company began selling a proprietary surgical adhesive to seal up arteries. Over the next two decades that company would acquire several highly specialized products for patients undergoing heart surgery.
Today, the company is hitting its stride as surgeons and patients (and the FDA) see how much better its solutions are.
This month’s Issue has all the details.
Today, the company is hitting its stride as surgeons and patients (and the FDA) see how much better its solutions are.
This month’s Issue has all the details.
The digital marketing world has been turned upside down as new privacy measures make it more challenging to track consumers across online and in-app activities.
But one company has been building out a unique opt-in data set and the backend technology to do just that. It sells this information to the biggest companies in the world so they can reach consumers with personalized marketing messages. With the new privacy measures, business is strong.
All the details are inside the May Issue of Cabot Small-Cap Confidential.
But one company has been building out a unique opt-in data set and the backend technology to do just that. It sells this information to the biggest companies in the world so they can reach consumers with personalized marketing messages. With the new privacy measures, business is strong.
All the details are inside the May Issue of Cabot Small-Cap Confidential.
There is a growing mental health crisis going on out there.
But it’s starting to be addressed by a tiny, unknown (so far) company with a virtual care platform that’s beginning to make a difference across the U.S. And it’s doing so while growing both the top and bottom lines.
All the details are inside the April Issue of Cabot Small-Cap Confidential.
But it’s starting to be addressed by a tiny, unknown (so far) company with a virtual care platform that’s beginning to make a difference across the U.S. And it’s doing so while growing both the top and bottom lines.
All the details are inside the April Issue of Cabot Small-Cap Confidential.
Half of all people need cataract surgery. But even though messing with your eyes is a massive decision, the Big 3 MedTech players in this market don’t have the best solution out there.
This is where today’s company comes in. It has developed cutting-edge technology that drives better outcomes for patients needing cataract surgery. The key? Its lens can be customized once in the eye!
All the details are inside the March Issue of Cabot Small-Cap Confidential.
This is where today’s company comes in. It has developed cutting-edge technology that drives better outcomes for patients needing cataract surgery. The key? Its lens can be customized once in the eye!
All the details are inside the March Issue of Cabot Small-Cap Confidential.
The auto insurance market has been in a deep freeze since the middle of 2021. But now it’s thawing ... maybe even shifting into growth mode. That means huge potential for companies with direct access to the market.
That’s where today’s idea comes in. It’s a micro-cap internet company that offers unfiltered exposure to the auto, home and renters’ insurance markets.
All the details are inside the February Issue of Cabot Small-Cap Confidential.
That’s where today’s idea comes in. It’s a micro-cap internet company that offers unfiltered exposure to the auto, home and renters’ insurance markets.
All the details are inside the February Issue of Cabot Small-Cap Confidential.
Updates
The market has been singing a more bullish tune lately and small caps are back in the headlines.
That’s because small caps enjoyed a nice rally after last week’s CPI and PPI data came out and the 10-year yield retreated.
Market observers have seen that the market rally has been broadening beyond just the Magnificent 7 and that small and mid-caps (SMID-caps) have been getting in on the action as well.
That’s because small caps enjoyed a nice rally after last week’s CPI and PPI data came out and the 10-year yield retreated.
Market observers have seen that the market rally has been broadening beyond just the Magnificent 7 and that small and mid-caps (SMID-caps) have been getting in on the action as well.
The market’s trends were looking pretty iffy until better-than-feared inflation data came out on Tuesday (PPI) and Wednesday (CPI).
Those data releases finally gave Treasuries a boost and knocked the 10-year yield down from last week’s level of 4.8%, which was the highest since November of 2023 (the 10-year yield hit 4.74% last April, which was close, but not quite as high as last week).
Those data releases finally gave Treasuries a boost and knocked the 10-year yield down from last week’s level of 4.8%, which was the highest since November of 2023 (the 10-year yield hit 4.74% last April, which was close, but not quite as high as last week).
Note: Due to the Christmas holiday, there will be no Cabot Small-Cap Confidential update next week. Happy holidays!
In last week’s update I spoke about the potential for a market retreat early in 2025 given that investors are sitting on sizeable paper profits, and selling after December 31 would allow them to postpone capital gains taxes.
My projection may have been off by a week and a half.
In last week’s update I spoke about the potential for a market retreat early in 2025 given that investors are sitting on sizeable paper profits, and selling after December 31 would allow them to postpone capital gains taxes.
My projection may have been off by a week and a half.
The big macro news of the week wasn’t specific to small caps, but it sure helped in stopping a sliding small-cap index at its 25-day moving average line yesterday.
I’m referring to the CPI print for November, which was released at 8:30 AM ET yesterday and gave most of the major market indices a boost, with the exception of the Dow.
I’m referring to the CPI print for November, which was released at 8:30 AM ET yesterday and gave most of the major market indices a boost, with the exception of the Dow.
Small-cap stocks continue to act extremely well, and we have a new all-time high for the S&P 600 SmallCap Index. It hit 1,520 on an intra-day basis on Monday, then closed at 1,545. Both levels surpass the previous all-time high of 1,477 from November 2021.
The index is hanging tight to those levels today too, trading near 1,537.
The index is hanging tight to those levels today too, trading near 1,537.
Quick Note: Due to the Thanksgiving holiday, you will receive next week’s Small-Cap update a day early, on Wednesday, November 27, 2024.
The S&P 600 SmallCap Index raced higher right after the election, gave a little back last week, found support at the previous all-time high early this week, and is now rallying again.
I think the small-cap story is starting to get out there and driving a wave of interest from investors who haven’t given small caps much thought for a few years. There is so much potential to rally from here that it can be a little hard not to get too bullish.
The S&P 600 SmallCap Index raced higher right after the election, gave a little back last week, found support at the previous all-time high early this week, and is now rallying again.
I think the small-cap story is starting to get out there and driving a wave of interest from investors who haven’t given small caps much thought for a few years. There is so much potential to rally from here that it can be a little hard not to get too bullish.
Trump’s victory has given the S&P 600 SmallCap Index the jolt it needed to break out above this year’s overhead resistance at 1,465.
This is what it looks like on a daily chart going back about a year ...
This is what it looks like on a daily chart going back about a year ...
The broad market has been resilient up until today when we see Microsoft (MSFT) leading the Nasdaq lower.
That said, small caps are hanging tough and are almost exactly flat over the last week.
The darn 10-year yield is still up, which signals the market thinks the Fed did not need to cut by 50bps in September. I’m increasingly dubious about a rate cut next Thursday, even though the market is saying there’s a 95% probability of a cut.
That said, small caps are hanging tough and are almost exactly flat over the last week.
The darn 10-year yield is still up, which signals the market thinks the Fed did not need to cut by 50bps in September. I’m increasingly dubious about a rate cut next Thursday, even though the market is saying there’s a 95% probability of a cut.
The S&P 600 SmallCap Index has dipped about 3% over the last week while yields have gone up.
The chart of the 10-year yield and the small-cap index plotted together makes this inverse relationship (in the very short term) clear as day.
The chart of the 10-year yield and the small-cap index plotted together makes this inverse relationship (in the very short term) clear as day.
While the S&P 500 Index made record highs (again) this week, the real story has been in small caps.
From last Wednesday’s close through mid-day today, the S&P 600 small-cap index is up 2.9%, more than twice the return of the large-cap index, which is up 1.3%.
The gains have been propelled by consumer discretionary, staples, financials, industrials and tech stocks.
From last Wednesday’s close through mid-day today, the S&P 600 small-cap index is up 2.9%, more than twice the return of the large-cap index, which is up 1.3%.
The gains have been propelled by consumer discretionary, staples, financials, industrials and tech stocks.
The small-cap indices (Russell 2000 and S&P 600) have been totally uninspiring over the last three weeks, which is sort of odd given that the Fed cut interest rates by 50 basis points almost exactly three weeks ago.
Theoretically, lower rates should benefit small caps given higher exposure to variable rate debt, which requires lower interest payments as rates decline.
Theoretically, lower rates should benefit small caps given higher exposure to variable rate debt, which requires lower interest payments as rates decline.
Small caps have bounced around this week, taking a break from the rally that began on September 11 and continued through the 19th.
Behind the scenes, analysts have been increasing their earnings expectations for the asset class. This is largely because rates are falling, but also because the economy is holding up.
Behind the scenes, analysts have been increasing their earnings expectations for the asset class. This is largely because rates are falling, but also because the economy is holding up.
Alerts
I hope you’ve had a wonderful holiday season and are looking forward to a healthy and profitable 2025. I know I am.
Shares of Perpetua Resources (PPTA) closed down 13% yesterday, likely on speculation that there will be a delay in the final Record of Decision (ROD) for the Stibnite Project.
Shares of Mama’s Creations (MAMA) are trading down this morning in what “should” be a short-term retreat following a solid Q3 report. The takeaway from the report is that Mama’s has made considerable progress building the foundation for faster, higher-margin growth and is past construction and commodity-related disruptions that impacted Q3 results.
We’re going to show respect for the deteriorating breadth of the market by selling Willdan Group (WLDN) today at about our entry point (maybe 1% or 2% below it, depending).
We’re doing things a little differently this month since there’s potential for a stock-moving announcement tomorrow that could impact this month’s new addition, which is a speculative mining stock.
Last evening Zeta (ZETA) responded to the Culper Research short report with a scathing review of the allegations, saying, in short, that Culper is full of it and doesn’t know what the heck it’s talking about. It couldn’t even get Zeta’s auditor right. Link to the press release here.
I moved Zeta (ZETA) to buy this morning given the rather extreme selloff after earnings. Not long after that alert went out, a short seller by the name of Culper Research issued a short report on Zeta. | By far the most questions I’m getting right now are about Zeta (ZETA). You read my update yesterday, and it was bullish. Analysts increased price targets from the mid-30s into the low 40s, with some going up to 50.