Issues
The market remains very challenging for high-growth stocks. While I have a list of innovative companies I’m excited to recommend (at some point), for now we’ll continue to diversify our portfolio with more value-oriented names.
This month’s new addition is a little-known supermarket chain I’ve been following for some time. The pitch is very straightforward – rising prices and an insulated business model should help the company post impressive growth in 2022 and 2023. Not to mention we have upside if/as the name spreads among investors that are increasingly looking for just this kind of stock.
Last but not least, the chart looks fantastic.
This month’s new addition is a little-known supermarket chain I’ve been following for some time. The pitch is very straightforward – rising prices and an insulated business model should help the company post impressive growth in 2022 and 2023. Not to mention we have upside if/as the name spreads among investors that are increasingly looking for just this kind of stock.
Last but not least, the chart looks fantastic.
Inflation is hot and the Fed just began raising rates. It is expected to hike ten more times by the end of next year.
While yield curve inversion and recession risk is out there, many banks are flush with cash. And consumers are in great shape. As rates go steadily higher, bank stocks are poised to significantly grow earnings.
The most aggressive way to play this is with a bank that’s leveraged to short-term rates. That’s the strategy we’ll take today with a pure-play digital currency bank.
Enjoy!
While yield curve inversion and recession risk is out there, many banks are flush with cash. And consumers are in great shape. As rates go steadily higher, bank stocks are poised to significantly grow earnings.
The most aggressive way to play this is with a bank that’s leveraged to short-term rates. That’s the strategy we’ll take today with a pure-play digital currency bank.
Enjoy!
With so much going on in the world the trends are a bit messy. That said, I have noticed an uptick in several of the small-cap MedTech players on my watch list.
These businesses could be poised for a nice recovery in 2022 and 2023 as COVID-19 recedes. And the one that tops my list is posting massive growth as its revolutionary treatment for BPH has just gained full Medicare backing and is rolling out into U.S. hospitals.
With revenue set to grow by multiples in the coming years and the stock trading at an apparent steep discount to peers, we’ll jump in now.
Enjoy!
These businesses could be poised for a nice recovery in 2022 and 2023 as COVID-19 recedes. And the one that tops my list is posting massive growth as its revolutionary treatment for BPH has just gained full Medicare backing and is rolling out into U.S. hospitals.
With revenue set to grow by multiples in the coming years and the stock trading at an apparent steep discount to peers, we’ll jump in now.
Enjoy!
With the bulls and bears continuing to fight it out in the growth arena, we’re moving into a more cyclical industry with today’s addition.
The company is a leading maker of semiconductor manufacturing equipment. This industry is growing rapidly as the current innovation wave requires smaller, faster and more durable chips.
Making those chips at scale can only be done with specialized measurement and process control equipment. Which is exactly what this company specializes in.
Enjoy!
The company is a leading maker of semiconductor manufacturing equipment. This industry is growing rapidly as the current innovation wave requires smaller, faster and more durable chips.
Making those chips at scale can only be done with specialized measurement and process control equipment. Which is exactly what this company specializes in.
Enjoy!
The market is a bit of a mess, but the selloff has created opportunities to pick up shares in high-growth small- cap names at what seems like extremely attractive prices.
Today’s recommendation is one of those names. It’s a marketplace company that is revolutionizing the outdated industrial manufacturing industry.
While the stock hasn’t been immune to bouts of market volatility it has been far more stable lately than most other high-growth names. It’s up over the last three weeks! And it offers investors exposure to an industry that is seen rebounding in 2022 and 2023.
Enjoy!
Today’s recommendation is one of those names. It’s a marketplace company that is revolutionizing the outdated industrial manufacturing industry.
While the stock hasn’t been immune to bouts of market volatility it has been far more stable lately than most other high-growth names. It’s up over the last three weeks! And it offers investors exposure to an industry that is seen rebounding in 2022 and 2023.
Enjoy!
Today’s new addition is a semiconductor company. It designs products that are the heartbeat of digital technologies. Its content is found in electric vehicles, datacenters, IoT devices, airplanes, mobile devices and more. It is benefitting from surging demand from Apple (AAPL) products, from which it generated 40% of revenue in 2020. While the market cap is a little larger than we typically look for, the opportunity warrants the exception at this time.
Recently, we’ve been adding very aggressive, high-growth names. These potential moonshots are a lot of fun to research and buy, but we need to maintain balance in our portfolio.
This month we’re going with more of a Steady Eddie-type, a small-cap company with a measured growth profile that features sustainable top line growth, significant EPS, and enough cash flow to fund both dividend payments and share repurchases.
I think in a few years we’ll look back and say it was one of the better investment decisions we made in 2021.
Enjoy!
This month we’re going with more of a Steady Eddie-type, a small-cap company with a measured growth profile that features sustainable top line growth, significant EPS, and enough cash flow to fund both dividend payments and share repurchases.
I think in a few years we’ll look back and say it was one of the better investment decisions we made in 2021.
Enjoy!
Today we are jumping into a small-cap biotech company that has a drug delivery platform that could completely revolutionize how injectable drugs are delivered.
The short version is that millions of people that require injections could, if all goes well, just take a pill instead.
While the risks are meaningful with any biotech, so too is the potential. Early data shows this platform works, and already there are programs being designed to deliver treatments for osteoporosis, Type-2 diabetes and arthritis.
It’s all inside this month’s Issue.
The short version is that millions of people that require injections could, if all goes well, just take a pill instead.
While the risks are meaningful with any biotech, so too is the potential. Early data shows this platform works, and already there are programs being designed to deliver treatments for osteoporosis, Type-2 diabetes and arthritis.
It’s all inside this month’s Issue.
Today’s new addition has all the attributes we look for in a small-cap software stock.
The company is young, management is insanely smart, the products fit a huge need, growth is 30%+, and the sales team is growing quickly.
In short, it’s an extremely attractive opportunity. Which is why we’re jumping in right after the company came public.
Enjoy!
The company is young, management is insanely smart, the products fit a huge need, growth is 30%+, and the sales team is growing quickly.
In short, it’s an extremely attractive opportunity. Which is why we’re jumping in right after the company came public.
Enjoy!
Among all the small-cap stocks I’ve studied in recent weeks one keeps jumping out at me. In fact, I’ve been eying it since March. It’s time to act.
This stock is different in virtually every respect from our typical stock. It’s not high tech and growth isn’t off the charts. That’s because it’s a value stock.
I think once you read my report you’ll “get it.” And in a year or so I believe this stock will be trading 50% to 100% higher than it is now, meaning it could offer the same upside potential as growthier names.
Enjoy!
This stock is different in virtually every respect from our typical stock. It’s not high tech and growth isn’t off the charts. That’s because it’s a value stock.
I think once you read my report you’ll “get it.” And in a year or so I believe this stock will be trading 50% to 100% higher than it is now, meaning it could offer the same upside potential as growthier names.
Enjoy!
The growth stock selloff of February and March knocked good software companies down a peg. But many of these stocks are bouncing back now as investors realize growth isn’t going to evaporate as the pandemic eases.
Today’s addition is a newly public company with a software platform for hosting virtual events. The pandemic supercharged growth and revenue doubled. Deeper evaluation of the trends suggests things will calm down a little, but growth should be sustained well above 20% for years and could even top 30%.
Despite the potential, the stock is dirt-cheap as compared to its peers. We’ll jump in now before investors realize the disconnect.
Enjoy!
Today’s addition is a newly public company with a software platform for hosting virtual events. The pandemic supercharged growth and revenue doubled. Deeper evaluation of the trends suggests things will calm down a little, but growth should be sustained well above 20% for years and could even top 30%.
Despite the potential, the stock is dirt-cheap as compared to its peers. We’ll jump in now before investors realize the disconnect.
Enjoy!
This month we’re jumping into a little-known company that makes and sells pop culture products.
It’s sort of an odd duck, but when you dig below the surface you find compelling products and interesting market exposures, including to the nascent Non-Fungible Token (NFT) market, which has exploded in trading value over the last year.
Revenue growth is above 30%, and the chart is strong.
Enjoy!
It’s sort of an odd duck, but when you dig below the surface you find compelling products and interesting market exposures, including to the nascent Non-Fungible Token (NFT) market, which has exploded in trading value over the last year.
Revenue growth is above 30%, and the chart is strong.
Enjoy!
Updates
There have been a number of conferences going on lately, so today’s update is partially focused on what our attending companies had to say.
There were no really big reveals, but also no change in tone from the management teams I listened to – and certainly nothing edging toward the more negative side of the scale.
Big picture, I’d say leadership teams continue to be somewhat conservative. Given that we only have a couple weeks left of Q3 they should have a pretty good handle on how the quarter should shake out (and the year for that matter).
There were no really big reveals, but also no change in tone from the management teams I listened to – and certainly nothing edging toward the more negative side of the scale.
Big picture, I’d say leadership teams continue to be somewhat conservative. Given that we only have a couple weeks left of Q3 they should have a pretty good handle on how the quarter should shake out (and the year for that matter).
Small caps had a decent week with the S&P Small Cap 600 ETF (IJR) rising just over 2% since our last update. This is a welcome relief on a number of levels, including from a technical perspective.
In late July the ETF looked like it was going to challenge the year’s high (from February) near 108. Momentum stalled at 105 as the calendar turned to August. By the 18th (two weeks ago) the IJR was just below 100, sitting on its 200-day moving average line.
In late July the ETF looked like it was going to challenge the year’s high (from February) near 108. Momentum stalled at 105 as the calendar turned to August. By the 18th (two weeks ago) the IJR was just below 100, sitting on its 200-day moving average line.
After three rough weeks in August, small caps have finally begun to stabilize around their 200-day moving average line.
I’d like to say blame for the weak performance rests fully on the shoulders of small-cap financials due to rising yields, commercial real estate mortgage default risk, etc.
But the truth is most sectors have been weak. Small-cap health care looks downright awful, with the Invesco S&P Small Cap Healthcare ETF (PSCH) hitting a new low for the year late last week.
I’d like to say blame for the weak performance rests fully on the shoulders of small-cap financials due to rising yields, commercial real estate mortgage default risk, etc.
But the truth is most sectors have been weak. Small-cap health care looks downright awful, with the Invesco S&P Small Cap Healthcare ETF (PSCH) hitting a new low for the year late last week.
Welcome to this week’s Cabot Macro Investor update.
I’m joking. We’re still all about small-cap stocks. But now that earnings season is over it’s all about the macro again. So we’ve got to address it.
In the second half of July, I felt like we were due for a pullback.
I’m joking. We’re still all about small-cap stocks. But now that earnings season is over it’s all about the macro again. So we’ve got to address it.
In the second half of July, I felt like we were due for a pullback.
The last two weeks have been a lot less fun than June and most of July. But big picture, a pullback is not remotely surprising.
Through yesterday’s close, both the large and small-cap indices were down about 2.6% from their recent highs. The Nasdaq was down almost 5%.
What is a little surprising is the rapid change of tone out there. This can be squarely blamed on Fitch’s downgrade of U.S. debt and Moody’s bearish notes on those 10 banks they think don’t look so hot.
Through yesterday’s close, both the large and small-cap indices were down about 2.6% from their recent highs. The Nasdaq was down almost 5%.
What is a little surprising is the rapid change of tone out there. This can be squarely blamed on Fitch’s downgrade of U.S. debt and Moody’s bearish notes on those 10 banks they think don’t look so hot.
Earnings season is now in full swing, but central bankers stole the show this week.
On Wednesday the FOMC hiked by another 25bps (as expected) and Fed Chair Jerome Powell gave the market just enough for the bulls to remain in control, for now.
The highlights: First, he said he thinks the Fed can get inflation down to 2% by 2025 while avoiding a recession. The Fed’s staff no longer predicts a recession.
On Wednesday the FOMC hiked by another 25bps (as expected) and Fed Chair Jerome Powell gave the market just enough for the bulls to remain in control, for now.
The highlights: First, he said he thinks the Fed can get inflation down to 2% by 2025 while avoiding a recession. The Fed’s staff no longer predicts a recession.
Aside from AI, a few other big-picture themes came into sharper focus for me this week.
All are positive for small caps.
First, economists and analysts are reducing their recession risk outlooks as the economy continues to hold up reasonably well. That’s good for small caps as they are more economically sensitive than mid and large caps.
All are positive for small caps.
First, economists and analysts are reducing their recession risk outlooks as the economy continues to hold up reasonably well. That’s good for small caps as they are more economically sensitive than mid and large caps.
With the 4th of July holiday last Tuesday it felt like 75% of the country was on vacation for the week and whatever happened in the market was a mirage.
This week things came into sharper focus. And the bull argument firmed up with the better-than-expected June CPI reading yesterday morning. The annualized 3.0% CPI inflation rate is the lowest in more than two years and came in below estimates of 3.1%.
That report helped the S&P 600 Small Cap Index, as represented by the iShares Core S&P Small-Cap ETF (IJR), jump up to its highest level since March 10 and move convincingly through the 100 level.
This week things came into sharper focus. And the bull argument firmed up with the better-than-expected June CPI reading yesterday morning. The annualized 3.0% CPI inflation rate is the lowest in more than two years and came in below estimates of 3.1%.
That report helped the S&P 600 Small Cap Index, as represented by the iShares Core S&P Small-Cap ETF (IJR), jump up to its highest level since March 10 and move convincingly through the 100 level.
Small caps put together a decent week as the iShares Core S&P 600 Small Cap ETF is up 3.6% from last Thursday’s close.
Digging a little deeper, we’ve seen a lot of strength in small-cap industrials and tech plus some stability in small-cap financials and energy.
Digging a little deeper, we’ve seen a lot of strength in small-cap industrials and tech plus some stability in small-cap financials and energy.
Small caps are off about one percentage point over the last week while the S&P 500 is almost dead flat.
All things considered, that feels like a win to me – largely because the Fed signaled potential for two more rate hikes throughout the year. The Fed’s rate hike program has been the market’s bogeyman for over a year. The message the market is sending now is that, yeah, you might keep us on our toes, bogeyman, but we’re not scared any more. You can be dealt with.
All things considered, that feels like a win to me – largely because the Fed signaled potential for two more rate hikes throughout the year. The Fed’s rate hike program has been the market’s bogeyman for over a year. The message the market is sending now is that, yeah, you might keep us on our toes, bogeyman, but we’re not scared any more. You can be dealt with.
The big news this week was, of course, that the FOMC decided to pause and not hike interest rates at the June meeting. But as expected they suggested that a couple more 25-basis point hikes are in the cards throughout the rest of the year.
It feels like this “we want to keep you guessing” messaging is partly due to wanting to see how more data comes in and partly to keep investor expectations in check. The latter seems especially relevant given the S&P 500 just moved into a new bull market and AI enthusiasm has pushed a number of the MegaCap stocks to new highs.
It feels like this “we want to keep you guessing” messaging is partly due to wanting to see how more data comes in and partly to keep investor expectations in check. The latter seems especially relevant given the S&P 500 just moved into a new bull market and AI enthusiasm has pushed a number of the MegaCap stocks to new highs.
While everyone has been watching the highlight reel of top performers with leverage to the AI theme lately, the real story this week is that more areas of the market are shaping up.
Yesterday, while the Nasdaq sold off, we saw the S&P 600 Small Cap Financial ETF (PSCF) pop 3%. That came on the heels of a 4% rally Tuesday.
Yes, yes, I know. Nobody really cares about this ETF. But small banks make up almost a third of total U.S. deposits. They matter, bigly.
Yesterday, while the Nasdaq sold off, we saw the S&P 600 Small Cap Financial ETF (PSCF) pop 3%. That came on the heels of a 4% rally Tuesday.
Yes, yes, I know. Nobody really cares about this ETF. But small banks make up almost a third of total U.S. deposits. They matter, bigly.
Alerts
It’s nice to see Duolingo (DUOL) responding well to another very solid earnings release. The company reported that Q2 revenue grew 43.5% to $126.8 million (beating by $3.1 million) while adjusted EPS of $0.08 improved from -$0.38 in the year-ago quarter and beat by $0.27.
SI-Bone (SIBN) reported yesterday afternoon that revenue rose by 30% to $33.3 million (beating by almost $2 million) and EPS came in at -$0.30, a penny better than expected. Management raised full-year guidance by $3.5 million to $133 million (at the midpoint), about $1 million more than the Q2 beat.
Sell Terex (TEX)
We jumped into TEX four months ago on March 3, literally just a few days before the stock took a dive that ended up sending it 30% lower over the next few weeks. We held on and those of you that added shares along the way should have a much better return than the roughly 7% gain showing in our official portfolio. With so many growthier stocks acting well and TEX up over 50% from its April lows, I’m going to take the modest gain and boot it from our portfolio today. To be clear, I don’t hate TEX and think the bullish thesis I presented back in March still holds true. That said, the reality is there are just too many other stocks with better upside potential right now and I want to maintain concentration in those while taking down our market exposure ever so slightly through next week’s Fed meeting (our next Issue is due out in two weeks). SELL
We jumped into TEX four months ago on March 3, literally just a few days before the stock took a dive that ended up sending it 30% lower over the next few weeks. We held on and those of you that added shares along the way should have a much better return than the roughly 7% gain showing in our official portfolio. With so many growthier stocks acting well and TEX up over 50% from its April lows, I’m going to take the modest gain and boot it from our portfolio today. To be clear, I don’t hate TEX and think the bullish thesis I presented back in March still holds true. That said, the reality is there are just too many other stocks with better upside potential right now and I want to maintain concentration in those while taking down our market exposure ever so slightly through next week’s Fed meeting (our next Issue is due out in two weeks). SELL
Sell Terex (TEX)
We jumped into TEX four months ago on March 3, literally just a few days before the stock took a dive that ended up sending it 30% lower over the next few weeks. We held on and those of you that added shares along the way should have a much better return than the roughly 7% gain showing in our official portfolio. With so many growthier stocks acting well and TEX up over 50% from its April lows, I’m going to take the modest gain and boot it from our portfolio today. To be clear, I don’t hate TEX and think the bullish thesis I presented back in March still holds true. That said, the reality is there are just too many other stocks with better upside potential right now and I want to maintain concentration in those while taking down our market exposure ever so slightly through next week’s Fed meeting (our next Issue is due out in two weeks). SELL
We jumped into TEX four months ago on March 3, literally just a few days before the stock took a dive that ended up sending it 30% lower over the next few weeks. We held on and those of you that added shares along the way should have a much better return than the roughly 7% gain showing in our official portfolio. With so many growthier stocks acting well and TEX up over 50% from its April lows, I’m going to take the modest gain and boot it from our portfolio today. To be clear, I don’t hate TEX and think the bullish thesis I presented back in March still holds true. That said, the reality is there are just too many other stocks with better upside potential right now and I want to maintain concentration in those while taking down our market exposure ever so slightly through next week’s Fed meeting (our next Issue is due out in two weeks). SELL
Sell Terex (TEX)
We jumped into TEX four months ago on March 3, literally just a few days before the stock took a dive that ended up sending it 30% lower over the next few weeks. We held on and those of you that added shares along the way should have a much better return than the roughly 7% gain showing in our official portfolio. With so many growthier stocks acting well and TEX up over 50% from its April lows, I’m going to take the modest gain and boot it from our portfolio today. To be clear, I don’t hate TEX and think the bullish thesis I presented back in March still holds true. That said, the reality is there are just too many other stocks with better upside potential right now and I want to maintain concentration in those while taking down our market exposure ever so slightly through next week’s Fed meeting (our next Issue is due out in two weeks). SELL
We jumped into TEX four months ago on March 3, literally just a few days before the stock took a dive that ended up sending it 30% lower over the next few weeks. We held on and those of you that added shares along the way should have a much better return than the roughly 7% gain showing in our official portfolio. With so many growthier stocks acting well and TEX up over 50% from its April lows, I’m going to take the modest gain and boot it from our portfolio today. To be clear, I don’t hate TEX and think the bullish thesis I presented back in March still holds true. That said, the reality is there are just too many other stocks with better upside potential right now and I want to maintain concentration in those while taking down our market exposure ever so slightly through next week’s Fed meeting (our next Issue is due out in two weeks). SELL
Expensify (EXFY) reported underwhelming Q1 2023 results after the bell yesterday. Our goal here was to get into what seems like a promising long-term opportunity with a small specialist (expense management and other financial tools for small and very small businesses) before the trends turned more positive.
Intapp (INTA) reported another solid quarter after the closing bell yesterday, sending shares up around 15% today.
Alphatec reported preliminary Q1 results on April 19 when the company announced the acquisition of the REMI Robotic Navigation System.
Sprout Social beat on the top and bottom lines after the close yesterday. Revenue rose 31% to $75.2 million (beat by $130K) while EPS of $0.06 improved from a loss of -$0.03 in the year-ago quarter and beat by $0.07.
Terex reported Q1 2023 results that beat expectations after the close yesterday. The company also raised full-year guidance by more than the Q1 beat. The result should quiet some of the concerns of a slowdown and help the stock do well today.
Flywire (FLYW) reported Q4 results after the close yesterday that beat expectations on the top and bottom lines. Revenue was up 42% to $73 million (beat by $7.55 million) while GAAP EPS of -$0.01 beat by $0.11.
Expensify (EXFY) reported after the bell yesterday and revenue was a touch light (2% miss) while EPS beat expectations on the back of strong margins. Revenue rose 7.8% to $43.5 million (missed by $850K) while adjusted EPS of $0.07 beat by a penny. Management reaffirmed long-term revenue guidance of 25% to 35%.