All of a sudden small-cap stocks are the talk of the town.
I guess that’s what happens when the asset class posts its best five-day streak since April 2020!
Despite the recent move, Barclays reports that Commodity Trading Advisor (CTA) positioning is still neutral on small caps (overweight S&P 500 and Nasdaq), leaving ample room for more buying.
So how does the recent small-cap rally affect the year-to-date gains of the major market indices?
It has definitely helped, though the S&P 600’s 7.7% YTD gain still lags the S&P 500’s 17% gain by a wide margin. The chart below tells the story.
Looking a little deeper, you can clearly see that the biggest areas of small-cap underperformance are tech (can’t compete with the Mag-7 even though small-cap tech outperformed by 6.4% over the last five sessions) and consumer staples.
On the flip side, in more rate-sensitive areas like industrials and materials, small caps have pulled ahead.
I think it’s likely that the combination of the “Trump Trade” (potential that lower regulation has outsized benefits for small companies), expected interest rate cuts (seems like a lock for September, with two or three total cuts this year), relative underweights in small caps, low relative valuation and an extended period of underperformance keeps interest in the asset class relatively high for a while here.
In short, now that the cat is out of the bag, so to speak, I think it’s time for small caps to shine once again.
Recent Changes
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Updates
Artivion (AORT) had a fantastic July and hit an all-time high on Tuesday. Shares were relatively resilient in the face of yesterday’s market retreat as MedTech was a relative outperformer (AORT -2%, SPX -1.4%, IHI +0.2%). There’s no material news since the company announced it had amended its agreements with Endospan to provide more debt funding in exchange for lowering the acquisition price on its purchase option. Endospan’s NEXUS is expected to gain FDA approval in 2026. BUY
Expected Earnings Date: August 1
Docebo (DCBO) is expected to report around August 8. Shares continue to move sideways in the high 30s with no news. DCBO is growing revenue in the 18% to 20% range and is solidly profitable, with expected EPS of $0.90 this year growing by 40% in 2025. Recall that shares suffered after the Q1 report revealed the loss of a large customer due to M&A, but DCBO should be making progress with larger customers. Looking for the stock to join the broader software group’s upward move. BUY
Expected Earnings Date: August 8
Enovix (ENVX) will report Q3 earnings a week from next Wednesday (on July 31) then follow up the event with the grand opening of its Fab2 high-volume production facility in Penang, Malaysia a week later, on August 8. No incremental news to share since the mixed-reality headset news. Shares continue to act very well, despite yesterday’s -5% move. BUY
Confirmed Earnings Date: July 31
EverQuote (EVER) reports on August 5. The stock has been recovering from a mid-June drawdown to 18.2 and was an outlier yesterday with a 0.4% gain to close at 23.5. There’s overhead resistance from May around 25. EVER enjoyed a rally on Tuesday after its largest customer, Progressive (PGR), reported better-than-expected results driven by higher margin in personal auto. JPMorgan said about PGR, “... we expect the firm to gain outsized share in the personal auto market in the near term as it shifts
its focus to growth while competitors continue to implement sizable price increases.” That sounds good for EVER if you ask me. HOLD HALF
Confirmed Earnings Date: August 5
Intapp (INTA) was sold for a 35% gain last Tuesday. SOLD
Mama’s Creations (MAMA) is our newest addition and there’s been no big news since we jumped in, though shares just hit a new all-time high of 8.0. We’ll leave it at that this week! BUY
Expected Earnings Date: September 11
RxSight (RXST) has not yet recovered from last week’s drawdown, which was driven by a price target reduction from Stifel (75 to 70, RXST closed at 47.2 yesterday). Stifel maintains a buy rating but has survey data suggesting Light Delivery Device (LDD) placement attach rates might be slower than anticipated (I think we need to get to 77 in Q2, at least, for shares to rise) and upside from the recently introduced premium Light Adjustable Lens (the LAL+ version) might be more limited than hoped, at least in the near term. This would mark a reversal of the trends in Q1, when LDD placements beat expectations (though at 66 some investors were likely underwhelmed) and LAL pricing helped drive outperformance. This week BTIG bumped up their price target from 72 to 73. There is likely to be a lot of discussion on the Q2 call about the $115 million equity raise and related marketing spend in North America and abroad. BUY
Expected Earnings Date: August 5
TransMedics Group (TMDX) continues to hang out near 150 as we move closer to the Q2 report on July 31. There were a couple of price target increases this week as Morgan Stanley went from 104 to 145 and Piper Sandler went from 120 to 170. TMDX closed just shy of 150 yesterday. Morgan Stanley’s note mentioned that the Q2 focus will likely be on how OCS permits market expansion into less-than-optimal organ donor pools and on the evolution of two competitors, OrganOx (liver transplant tech) and the Swedish company, XVIVO (XVIPF), which has seen shares do very well recently. One wonders if TransMedics’ international growth plans might include XVIVO. HOLD A QUARTER
Confirmed Earnings Date: July 31
Weave (WEAV) stock has shown a little life lately, rising from the 9 to 10 level (roughly). We’ll get the Q2 report in two weeks, on July 31. BUY
Confirmed Earnings Date: July 31
Zeta Global (ZETA) has had a great week, rising from about 15.7 last Friday to over 20 today. The stock was picked up by Truist Securities, who slapped on a price target of 23. That follows a wave of analyst price target increases over the last three weeks. HOLD
Confirmed Earnings Date: July 31
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 | 7/18/24 | Profit | Rating |
AORT | Artivion | 6/5/24 | 23.3 | 27.3 | 17% | Buy |
DCBO | Docebo | 12/7/23 | 44.6 | 37.3 | -16% | Buy |
ENVX | Enovix | 10/6/22 | 20.4 | 17 | -17% | Buy |
EVER | EverQuote | 2/1/24 | 13.7 | 24 | 75% | Sold 1/2, Hold 1/2 |
INTA | Intapp | 1/4/23 | 25.7 | SOLD | 35% | SOLD |
MAMA | Mama’s Creations | 7/3/24 | NEW | 8.1 | NEW | Buy |
RXST | RxSight | 3/7/24 & 3/28/24 | 52.7 | 46.9 | -11% | Buy |
TMDX | TransMedics Group | 7/7/22 | 34.1 | 147.8 | 334% | Hold a Quarter |
WEAV | Weave Communications | 1/4/24 & 5/9/24 | 10.1 | 9.9 | -2% | Buy Second Half |
ZETA | Zeta Global | 5/2/24 | 12.6 | 20 | 59% | Hold |
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