August 29, 2024

The S&P 600 Small Cap ETF (IJR) closed out last week on a high note as the index rallied 3.4% on Friday following comments from Fed Chair Jerome Powell in Jackson Hole that confirmed what investors were expecting, that an interest rate cut in September is likely.

Small caps have chopped around this week, inching a little lower but not making any dramatic moves.

The market is now pricing in a roughly 35% probability of a 50-bp rate cut next month, and just over 100 bp of easing by the end of this year.

Probabilities may shift a little after the big economic event of the week, which is the PCE inflation reading tomorrow. July core PCE is expected to be unchanged from June, which would put the three-month annualized pace at 1.98%, below the Fed’s 2% target and the lowest since November 2023.

Big picture, small caps are still trading at a steep discount to large caps and are expected to post faster EPS growth in 2025. That’s a bullish setup, especially with fading interest rates on the table.

Let’s move on to our portfolio.

Recent Changes

None

Updates

Artivion (AORT) stock moved higher this week as MedTech stocks, as measured by the iShares MedTech ETF (IHI), continue a rally that’s now two weeks old. Artivion is a pure-play aortic disease MedTech company, selling medical devices, implantable human tissue and preservation services to cardiac and vascular surgeons treating patients with heart valve disease, aortic aneurysms and dissections. The next big product development milestone is to get the NEXUS aortic arch stent graft system approved in the U.S. NEXUS allows for aortic arch disease patients with aneurysms and dissections to avoid open chest surgery (multi-week recovery) and instead have a minimally invasive endovascular procedure (walk out of hospital next day). NEXUS is expected to be approved in late 2026. BUY

Docebo (DCBO) has been acting well lately, other than yesterday when the stock dipped 5% on no news. That retreat has wiped out the gains over the last week and kept DCBO from moving meaningfully above 45. DCBO closed yesterday at 43, an area of solid support from mid-April. Management will speak at a Citi conference on September 4, and the Docebo Inspire event is on September 11. BUY

Enovix (ENVX) continues to bounce around near the 10 level after giving back much of the gains it made this spring. As I wrote last week, the next milestone is to hear that the high-volume production line has achieved Site Acceptance Testing (SAT) and will begin sample production (should be by the end of September). We’re looking for meaningful production and revenue in late 2025. Consensus estimates call for 2025 revenue of $54 million (+160% over 2024), ramping to nearly $1 billion by the end of 2028. BUY

EverQuote (EVER) was sold a couple of weeks ago. SOLD

FTAI Infrastructure (FIP) continues to move sideways near its 25- and 50-day moving average lines, in the 9.0 to 9.5 range. There are no new press releases lately, but there’s a lot going on behind the scenes as FTAI Infrastructure is expanding across virtually all of its businesses. Revenue should grow by almost 60% between 2024 (estimated revenue of $365 million) and 2026 (estimated revenue of $575 million). Adjusted EBITDA profitability should expand even more, by nearly 90%, from $150 million to $284 million. BUY

Mama’s Creations (MAMA) will report Q2 results after the close on September 10, a week from next Tuesday. The microcap company is our play on prepared food in grocery stores. I’m hoping to hear that the company has landed a significant new customer or two, along the lines of Walmart (WMT) and/or Target (TGT). In Q2 revenue is expected to have grown by 13.5% to $28.1 million and EPS should come in around $0.03. BUY

Earnings Date: September 10

RxSight (RXST) is bumping up against resistance from June in the mid-50s range. Shares hit an intra-day high of 58.2 this week (Monday). It will take some doing for shares of this young ophthalmic MedTech company to break above 60, which would then put 66.5 as our next upside target (resistance from early May). The stock may get a bump from exposure soon as management will present at the Morgan Stanley Healthcare Conference next Wednesday (September 4) and the Wells Fargo Healthcare Conference next Thursday (September 5). RxSight is disrupting the cataract surgery market with the first and only FDA-Approved intraocular lens (IOL) technology that lets doctors customize a patient’s vision after cataract surgery. BUY

TransMedics Group (TMDX) has been trading near all-time highs in the 166 to 177 range over the last week. There’s no news to report. Hold A Quarter

Weave (WEAV) stock continues to tick higher above 11, with the next milestone being the intra-day high of 12.24 that was hit the day after the company reported Q2 results. The company just announced a new feature that enhances seamless integration of payment requests into practice workflows. BUY

Zeta Global (ZETA) stock moved back above 25 this week as the stock continues to act fantastically. BUY

That’s it for this week. Please email me at tyler@cabotwealth.com with any questions or comments about any of our stocks, or anything else on your mind.

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