Risk on (For Now), and XMTR Update
This morning’s “less bad” CPI report (what a difference 0.2% makes!) is just what the market needed to get off its knees. It’s too early to say whether or not this is the beginning of a change of character – much will depend on what Fed officials have to say when they get back on their soap boxes – but right now one thing’s for sure. This is a welcome rally.
I don’t believe it’s necessary to rush out and start buying stocks hand over fist if that’s what you’re wondering when you see the Nasdaq up 6% today. Yes, there are some fantastic moves and when you see tons of stocks up double digits, even some of the ones you own, it’s totally normal to wish you had more market exposure. But we need more than a slightly better-than-expected CPI report to pile in with conviction.
For those looking to ramp up small-cap exposure with something easy and “safe,” by far the best option is the iShares Core S&P 600 Small Cap ETF (IJR). You can go with the IJT if you want more growth, or the IJS if you want more value. The pitch here is straightforward – you get access to the asset class, which is cheap right now but avoid the stock-specific risk that’s made this year so tough.
To reiterate, for now, the CPI report is welcome news indeed. Let’s see how things go for a day or two before we get more aggressive. We’re enjoying a nice rally in our portfolio, including with Flywire (FLYW) which we added to yesterday, and new position Treace Medical (TMCI).
On to the only stock in our portfolio that’s down today, Xometry (XMTR). I gave a short update this morning. After listening to the conference call, the deal is buyers and sellers are still flocking to the platform but there was a span of a few weeks in August and September where orders were being fulfilled at a much faster rate than normal (36% faster, to be precise). This meant Xometry’s algorithm didn’t quite catch up and the company left value on the table. Said more simply, orders were filled at very low prices. Management saw this happening and let it run for a few weeks to capture data, then tweaked the algorithm to increase pricing. There is more going on, but big picture, it seems like the company should be able to deliver 35% growth next year, a little less than was expected. That shouldn’t equate to a 20% (or more) drop in the share price. But even during a market rally, investors don’t like surprises. I’ve kept XMTR at hold and will maintain that today. That said, for dip buyers out there I suspect XMTR can bounce in the coming sessions, especially if the broad market enjoys some follow-on strength. HOLD
