December 12, 2024

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.

The Nasdaq hit a new all-time high and the S&P 500 was darn close. The S&P 600 Index is trading 3.1% below its all-time high from November 25. It’s experienced a mild, multi-week pullback due to softness in the energy, financials, materials and utilities components of the index.

While both the headline and core CPI inflation rates (2.7% and 3.3%, respectively) remain above the Fed’s 2.0% target, that’s an apples-to-oranges comparison.

The Fed’s target is based on the PCE inflation rate, which has been about half a percentage point lower than the CPI rate (i.e. a lot closer to the Fed’s target) and has a much lower weighting of the sticky shelter component (about 15% weight in the PCE versus 33% in the CPI).

I’ll dip into the weeds here just for a second because inflation in that shelter component of CPI hit the lowest level since May, just 3.6%. That’s down from 4.4% in October. That’s good.

The bottom line here is CPI inflation continues to moderate (TBD if this can continue if/when Trump starts the Great Tariff and Currency Wars of 2025).

We’ll get the PCE inflation report for November next Friday, December 20, two days after the Fed’s next meeting and interest rate decision next Wednesday, December 18.

On that front, it’s basically a lock that the Fed will cut another 25bps next week. There continues to be some grumbling that the Fed doesn’t need to cut given how strong the economy is and because of the potential for inflation to tick higher given Trump’s proposed agenda. It seems extremely unlikely that the Fed would buck market expectations at this point.

Also, there’s always grumbling when it comes to the Fed. And Jerome Powell and crew aren’t in the business of speculating (too much) on potential future policies that aren’t yet reflected in the data.

Speaking of grumbling, there’s also been more chatter about a potential market retreat early in 2025.

With the Nasdaq, S&P 500 and S&P 600 all trading at or near all-time highs most investors should be sitting on some juicy paper profits. Selling positions before December 31 would likely trigger taxable gains (depends on whether enough losses were booked throughout the year to offset), which could be deferred a year by selling in the first few trading sessions of 2025.

This raises the question of whether it’s better to book some profits in anticipation of early-2025 selling, which would likely pull in buyers, or take a wait-and-see approach. The downside of doing the latter is that selling, especially in smaller company stocks, can be extremely swift and wipe out decent gains quickly.

I don’t have the perfect answer here. I’m not inclined to ditch any of our strong stocks until/unless we see some cracking and unless there’s some fundamental reason to sell. On the other hand, I look at names like Zeta (ZETA) that have been volatile on both a stock and story level and I start thinking, hmmm.

For now I’m going to keep close tabs on each of our positions and stick with current ratings.

Recent Changes

None

Updates

Artivion (AORT) announced this week that its AMDS Hybrid Prosthesis, which is not yet approved in the U.S., was granted a Humanitarian Device Exemption (HDE) from the FDA for the treatment of acute DeBakey Type I aortic dissections in the presence of malperfusion (about 40% of all acute DeBakey Type I dissections). If and when fully approved, AMDS represents about a $150 million annual U.S. market opportunity, which is significant. This HDE means Artivion is working with facilities and physicians now to obtain hospital IRB approvals so patients will have access to the medial device. A broader Premarket Approval is still expected by the end of 2025. BUY

AvePoint (AVPT) stock continues to look beautiful and seems to be consolidating around the 18 (roughly) area. The stock has a lot of leverage to Microsoft’s success, and the next leg of growth ties into Copilot and other AI solutions adoption. Expecting profit margin expansion to continue. HOLD

Docebo (DCBO) dipped in mid-November but has pulled back up to near the 50 level. I have my sights set on the 54 to 56 range given DCBO has traded up to those levels in November and March, respectively, before faltering. No major news to report lately, but the company has been recognized by two major organizations. It won top recognition, i.e. “Gold”, at the Canadian Marketing Association Awards for its Leaders in Learnings series. And it was awarded the 2024 AWS Rising Star Technology Italian Partner of the Year for its work in leveraging the AWS Partner Network to grow a successful AWS-based business. BUY

Enovix (ENVX) hasn’t had anything to share since the pre-Thanksgiving announcement that it hired a new Chief Technology Officer, Hongwei Yan. Speaking about the hire at the time, T.J. Rodgers, Enovix chairman, said, “We all know that Korea and China lead the world in lithium-ion batteries. Now, we have a top scientist who has worked at both Korea’s No. 1 battery company, Samsung SDI, and China’s No. 1 battery company, Amperex Technology Limited (ATL) where he led over 30 battery qualifications with a 100% success rate for a Tier 1 US mobile customer. He brings us deep technical relationships with the battery experts at our top customers, an in-depth understanding of their qualification processes, and a successful track record in working with them to scale their production.” BUY

FTAI Infrastructure (FIP) is a U.S.-focused infrastructure company with businesses ranging from rail lines to deepwater ports and terminals to data centers. I’ve been expecting the company to refinance some debt, and just before the Thanksgiving holiday management announced plans to refinance debt at Long Ridge. The high-level strategy here is to reduce fixed charges, provide more flexibility, and convert existing power sale hedges (set at $28 per megawatt hour) to a higher price that reflects current market prices. We’ll find out what the final details are when the refinancing goes through, but the bottom line is that this should drive higher adjusted EBITDA (a measure of earnings) from Long Ridge. Things have been quiet since, with no new SEC filings, so I suspect the refinancing is still in the works. Shares are still consolidating in the 7.9 to 10.5 range. BUY

Mama’s Creations (MAMA) was supposed to report Q3 earnings this week but pushed the date back until next Monday, December 16. The press release said the company is in the “process of completing the finalization of the financial statements for the third quarter …” because it changed its auditor on October 21. Back in October the company said it was making the change, to UHY, one of the nation’s largest professional services firms, because of the growth in the business and its goal to become the “next $1 billion deli solutions provider.” They were clear to say there were no accounting issues or disagreements. MAMA stock finally broke above 8.8 on November 21. BUY

Earnings Date: Monday, December 16

Peloton (PTON) was added just over a month ago, on November 7, and so far so good. The stock is up about 22% through yesterday’s close. The stock received a high-profile upgrade from Sell to Neutral from UBS on December 6 (price target 10.00), released its Strength+ app as a standalone strength training offering (priced at $1 per month for certain introductory offers, $9.99 for the regular Joes, included for All Access, Guide and App+ subscribers), and had management speak at the UBS Global Media and Communications Conference Tuesday. Shares have pulled back a little this week but are hanging pretty tight to the 10 level. BUY HALF

Perpetua Resources (PPTA) is the new kid on the block, having just earned a spot in our portfolio last week. Shares are up about 20% since, though some of that strength is almost certainly due to our collective buying pressure. The company also put out a couple of positive press releases on Monday. In my report, I had mentioned there was potential for Perpetua to work with U.S. Antimony (UAMY), which has processing facilities but no production. A partnership here could speed up the timeline to get antimony, collected as a byproduct of gold mining at the Stibnite Project once operations commence, processed and to market more quickly. That’s the topic of this press release, which says Perpetua has “… agreed to conduct metallurgical testing of antimony concentrate samples from Perpetua’s Stibnite Gold Project with Montana-based United States Antimony Corporation.” This is far from a major deal, but it’s an incremental step in the right direction. Perpetua also announced a similar deal, a Memorandum of Understanding (MOU), to “explore antimony processing opportunities with Sunshine Silver Mining & Refining Company, also based in Idaho.” This MOU is non-binding and non-exclusive, so basically a handshake deal to get some engineering and process flow work done to see if there’s potential to work together. BUY HALF

Weave (WEAV) is stretching its legs again and has officially broken out above overhead resistance at 13.8 from last February. This week WEAV has moved through the 15 level and looks fantastic. BUY

Willdan Group (WLDN) is moving sideways and hasn’t had any news to share for a few weeks. Looking for more contracts to be announced and signal that the business will do well under another Trump administration. BUY

Zeta Global (ZETA) had a great rally last week but faltered this week after news broke that two of its larger customers, Omnicon and Interpublic Group of Companies (IPG), will join forces. During the Zeta Data Summit, also held earlier this week, Zeta’ Co-Founder, Chairman and CEO said, “We are proud of our extensive relationships with the top Holdcos, including both Omnicom and IPG, and believe that today’s announcement is a positive one for the industry and Zeta. Like everyone else, we will be watching closely as this progresses and offer support as needed.” The takeaway isn’t that this is good or bad, it’s that there’s another angle of uncertainty. Which after the short report from a few weeks ago isn’t really what Zeta needed. Watching closely. HOLD

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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