Happy Thanksgiving Rally!
First, Happy Thanksgiving! I hope you have a nice long weekend wherever you are, and with whomever you will spend it.
Second, if you’re looking for a yummy and refreshing drink that’s not too strong and not too weak, consider a hard cider on ice. I was slow to jump on this bandwagon since I remember the hard ciders from my younger days as being downright awful. But the stuff they’re making today is top notch. Poured over a big glass of ice and sipped slowly makes for a hard to beat celebratory drink, in my opinion.
We’ve been drinking the varieties from Stowe Cider, Champlain Orchards and, when we go to Vermont, the Cold Hollow Cider Mill. Just like craft brews, there’s tons to choose from these days, so I’m sure there’s something delicious near you too.
Finally, how about this market?
I read this morning that the broad market just notched its 100th high since President Trump was elected. Hard to believe.
Perhaps even harder to believe is that small caps just might be breaking out!
The move was reported in several financial media outlets yesterday because the Russell 2000 Small Cap Index jumped out to a 52-week high.
The same thing occurred in the S&P 600 Small Cap Index.
There is no doubt this is an encouraging sign. Small caps have been lagging, and have failed to return to their 2018 highs, for too long. If the asset class can get back in gear, we’ll have more things working in the market for risk-tolerant investors (that’s us!).
When we drill down we see that the move in small caps isn’t from across-the-board rallies in small caps. It’s really because of a big move up in small cap health care stocks. The PowerShares Health Care ETF (PSCH) is up almost 9% over the past two weeks.
Other small cap sectors that are lending a hand and breaking out to multi-month highs include financials (the PSCF), industrials (PSCI), technology (PSCT).
This performance more or less lines up with what we’re seeing in our portfolio. Over the last two weeks our MedTech stocks have been on fire. Inspire Medical (INSP) is up 12%, Veracyte (VCYT) is up 21%, Quanterix (QTRX) is up 11% and both Arena Pharma (ARNA) and Repligen (RGEN) are up 7%.
Of course, we’ve had darn good performance across the entire portfolio recently. Over the last two weeks EverQuote (EVER) is up 27%, AppFolio (APPF) is up 12% and Avalara (AVLR) is up 11%.
Our average gain is now 103%. And with EverQuote now up 202%, Avalara up 100% and Rapid7 (RPD) up 112%, six of our 15 positions are posting gains of 100% or more. That’s nice.
We’ll see where we go from here. But in the short term, if you wanted to go with a relatively low risk trade, I’d say buying one of the small-cap ETFs could work out well for a 5% to 10% gain in the near-term (IJR for core, IJT for growth, or IJS for value).
Updates
We have no updates this week since there’s nothing new with any of our stocks. But we do have one change. AppFolio (APPF) has broken out above 110 and therefore moves back to buy. BUY.
AppFolio (APPF) moves from Hold to Buy.
That’s it for this week. Remember, the next Issue of Cabot Small-Cap Confidential comes out next Friday.