Happy New Year!
I hope you’ve had a wonderful holiday season and are looking forward to a healthy and profitable 2025. I know I am.
A quick reminder that due to the timing of Cabot office closures and taking a little time off to spend with extended family this holiday season, the first Issue of Cabot Small-Cap Confidential for 2025 will be published next Thursday, January 9.
Here’s something to think about in the first couple of days of 2025.
While the S&P 500 rose by 24.2% in 2023 and another 23.3% in 2024, the S&P 600 small-cap index rose by only 14.3% in 2023 and 6.6% in 2024.
Granted, a good deal of small caps’ underperformance this past year was due to a more dramatic pullback as compared to large caps in the last three weeks of the year. But the numbers are what they are.
Lacking the equivalent power of the Magnificent 7 to propel the index higher the S&P 600 underperformed by a wide margin.
That said, there has been no shortage of phenomenal performers in the small-cap universe, several of which have been featured in Cabot Small-Cap Confidential.
And with earnings growth for small caps expected to top that of large caps in 2025 (+17.5% for small caps vs. +14.5% for large caps), this just might be the year where the small-cap index squeaks out a higher return. Small caps are certainly due!
With respect to our portfolio stocks, there has been very little news over the holiday period that I haven’t previously shared.
The only incrementally new news is that Enovix (ENVX) has shipped second gen EX-2M samples to customers that were made in its Malaysian Fab 2 plant. These battery cells show a 10% energy density improvement as compared to the EX-1M batteries scheduled for mass production in 2025 and are expected to launch in 2026.
I expect news flow will pick up again as people return to the office.
Happy New Year,
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