The S&P 600 SmallCap Index has dipped about 3% over the last week while yields have gone up.
The chart below plots the small-cap index and the 10-year yield together, making this inverse relationship (in the very short term) clear as day.
When the Fed cut the federal funds rate (FFR) by 50bps in September I don’t think many expected the 10-year yield would soar over 60bps in the coming month.
For my fellow Fed-watching dorks out there, the following chart is tops. It’s from Yardeni Research, and it shows the expected FFR going out through late 2026 as of the time of the Fed’s conference in Jackson Hole in August (green line), at the time of the September meeting (red line), and at the beginning of the current week (blue line).
The punch line here is that market expectations for rate cuts have become less aggressive.
That’s part of why a lot of stocks, and the small-cap index, have lost the magic lately. The market is trying to digest the potential that even the more conservative current rate cut outlook might be too aggressive.
The thinking here is that the economy is strong (if not running hot) and the Fed did not need to cut, at least not by 50bps. And maybe there’s risk of inflation kicking up again. To be clear, this is a potential concern, not something that’s happening.
Adding fuel to the yield fire is also concern that it doesn’t matter if Republicans or Democrats take the White House and Congress – in either scenario, the federal budget deficit will grow and the nation’s interest payments will just keep going up.
That’s the glass-half-empty thinking lately.
On the flip side, a strong economy is generally a good thing, inflation has come down, rates should trend lower (even if not as low as some think) the election will come and go, as will the November Fed meeting, and it will be back to business.
Of course, the wrinkle in all this, and it’s a big one, is that earnings season is upon us. So I’m expecting a lot of fireworks with individual stocks regardless of what the broad market does.
In our portfolio, we have at least five reports coming next week. Buckle up!
Recent Changes
None
Updates
Artivion (AORT) is trading at the same level that it was when we left the stock a week ago. On Wednesday the stock was initiated at outperform by JMP Securities with a PT of 33 (stock closed at 26.9 yesterday). Last week I reviewed incremental positive progress on trial data, especially for PERSEVERE, which will be used to support FDA approval for AMDS. BUY
Expected Earnings Date: October 31
AvePoint (AVPT) reached its highest level since June of 2021 last Monday and has been inching down a little just about every day since. These little down days don’t typically concern me, provided they end at the obvious support zones. Right now, AVPT is trading near its 25- and 50-day moving average lines, so looking for shares to firm up here. Management has confirmed earnings will be on November 7. BUY
Confirmed Earnings Date: November 7
Docebo (DCBO) continues to look strong despite a wide price swing yesterday. This morning Scotiabank increased their price target on the stock from 50 to 55 (DCBO trading near 45.7 today). The company also put out a press release late last Thursday discussing how the company will team up with Intercap Equity to offer a free e-learning platform designed for small Canadian and U.S. charities and nonprofits. This is clearly not a revenue-generating opportunity, but rather a part of the company’s ongoing CSR initiatives. We have earnings on November 8. BUY
Confirmed Earnings Date: November 8
Enovix (ENVX) has been battling another wave of investor scrutiny given a lack of catalysts lately, other than the recent announcement that customers have begun sampling from the Fab-2 Agility Line. In the upcoming Q3 earnings release and conference call we want to hear an update on Site Acceptance Testing (SAT) for the high-volume line and progress with customer contracts. A note from J.P. Morgan discussed some speculation that a second Chinese smartphone OEM customer could be coming to the table soon. We will see. The firm dropped its price target from 18 to 15 (stock trading at 10.8) due to multiple compression in the clean tech space. Earnings are out next Wednesday. BUY
Confirmed Earnings Date: October 31
FTAI Infrastructure (FIP) will report next Wednesday when I expect to hear updates on all the progress being made with the various expansion projects at its businesses. This story is all about growing EBITDA (a measure of earnings), which has potential to expand from around $147 million this year to $240 million (+63%) in 2025. BUY
Confirmed Earnings Date: October 30
Mama’s Creations (MAMA) isn’t likely to report quarterly results until December. The stock worked up to its all-time high two weeks ago then pulled back and is now in the middle of its established consolidation range (7.0 – 8.7). It could easily hang out in this area until earnings. The story behind the stock chart remains one of a little-known and pretty straightforward company that represents a play on the prepared foods growth trend. BUY
Expected Earnings Date: December 10
TransMedics Group (TMDX) continues to act poorly, though the stock is now right at its 200-day line and trying to stabilize. I’ve talked in recent weeks about some conflicting reports about the company’s growth opportunity given comments from management and a surgeon from the University of Pittsburgh. What makes this tough is the sample size of client feedback is just one. Another consideration is that the company is set to lap the addition of its services/air charter business in the upcoming quarterly report, so the growth rate is set to come down to a more normalized level. For example, Q3 revenue growth in 2023 was 159% whereas it’s expected to be “just” around 73% this year. That said, last quarter held an upside surprise, especially in the heart business, which drove revenue 15.6% higher than expected. So we have a company here that’s still in transition and has a history of surprising but also a stock that tends to be volatile when uncertainty creeps in, as it has lately. We’re down to a quarter position, so I’m inclined to let our remaining stake ride through earnings next Monday and go from there. Given how much the stock has pulled back, an upside surprise could really give shares a boost. Hold a Quarter
Confirmed Earnings Date: October 28
Weave (WEAV) traded right up to the stock’s 2024 high of 13.8 at the end of last week then promptly pulled back this week. Predictable! On Tuesday Weave announced it has released an entirely new platform user interface that integrates AI tools, enhanced communication, scheduling, and billing and payment options directly into communication workflows. This is one of those companies that’s just chipping and chipping away at being better. It’s one of the earnings reports I’m most interested in hearing. And it’s coming right up, next Wednesday. BUY
Confirmed Earnings Date: October 30
Willdan Group (WLDN) announced on Monday that the company was selected as the City of Palmdale, CA’s consultant to lead a new program focusing on innovative solutions and smart city development. This is a three-year contract, with the scope of potential projects to include enhancements for energy technologies, public-safety smart technology, connectivity, health and safety, mobility, alternative energy, complex development and water. Earnings are up next Thursday. BUY
Confirmed Earnings Date: October 31
Zeta Global (ZETA) has been under pressure since right after management announced it would acquire LiveIntent. That deal just closed on Monday and is supposed to be accretive to growth, gross margins and cross-selling. Following the deal closing, KeyBank initiated coverage with a price target of 40 and Oppenheimer raised their price target from 29 to 33. ZETA peaked at 34 a couple of weeks ago and trades at 26.3 today. Sticking with hold for now. HOLD
Confirmed Earnings Date: November 11
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.
Currently Open
| Ticker | Stock Name | Date Bought | Price Bought | 10/24/24 | Profit | Rating |
| AORT | Artivion | 6/5/24 | 23.3 | 26.5 | 14% | Buy |
| AVPT | AvePoint | 9/5/24 | 11.6 | 12 | 3% | Buy |
| DCBO | Docebo | 12/7/23 | 44.6 | 45.8 | 3% | Buy |
| ENVX | Enovix | 10/6/22 | 20.4 | 10.9 | -47% | Buy |
| FIP | FTAI Infrastructure | 8/1/24 | 10.2 | 8.9 | -12% | Buy |
| MAMA | Mama’s Creations | 7/3/24 | 7.2 | 7.6 | 6% | Buy |
| TMDX | TransMedics Group | 7/7/22 | 34.1 | 120.3 | 253% | Hold A Quarter |
| WEAV | Weave Communications | 1/4/24 & 5/9/24 | 10.1 | 13.1 | 29% | Buy |
| WLDN | Willdan Group | 10/3/24 | 42 | 44.4 | 6% | Buy |
| ZETA | Zeta Global | 5/2/24 | 12.6 | 26.3 | 109% | Hold |
Copyright © 2024. All rights reserved. Copying or electronic transmission of this information without permission is a violation of copyright law. For the protection of our subscribers, copyright violations will result in immediate termination of all subscriptions without refund. Disclosures: Cabot Wealth Network exists to serve you, our readers. We derive 100% of our revenue, or close to it, from selling subscriptions to our publications. Neither Cabot Wealth Network nor our employees are compensated in any way by the companies whose stocks we recommend or providers of associated financial services. Employees of Cabot Wealth Network may own some of the stocks recommended by our advisory services. Disclaimer: Sources of information are believed to be reliable but they are not guaranteed to be complete or error-free. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on information assume all risks involved. Buy/Sell Recommendations: are made in regular issues, updates, or alerts by email and on the private subscriber website. Subscribers agree to adhere to all terms and conditions which can be found on CabotWealth.com and are subject to change. Violations will result in termination of all subscriptions without refund in addition to any civil and criminal penalties available under the law.
