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Small-Cap Confidential
Undiscovered stocks that can make you rich

March 23, 2023

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Yesterday the FOMC decided to move ahead with another 25bps hike, bringing its federal funds target rate to a range of 4.75% to 5%. The statement was missing the phrase, “...ongoing increases in rates would be appropriate,” which was present in the eight previous statements, suggesting the Fed may be done hiking soon.

During his press conference, Jerome Powell recognized that the banking crisis is roughly equivalent to a rate hike.

The market was up after the initial Fed rate hike decision, then fell after Powell’s press conference. But it wasn’t his “fault,” exactly. We can lay that blame on U.S. Treasury Secretary Janet Yellen who, speaking at a congressional hearing, said that she had “… not considered or discussed anything having to do with blanket insurance or guarantees of deposits.”

That comment flew in the face of her more market-friendly comment at the American Bankers Association Conference on Tuesday, when she said, “Let me be clear: The government’s recent actions have demonstrated our resolute commitment to take the necessary steps to ensure that depositors’ savings and the banking system remain safe.”

Which is it?

The market doesn’t like uncertainty. Lurking risks to the financial system certainly qualify. As do wishy-washy statements from Jerome Powell (the Fed) and Janet Yellen (Treasury), who obviously want to provide assurance to everybody that the U.S. banking system is in fine shape (both have recently described it as “safe,” “sound,” “resilient” and/or “stabilizing”).

The reality is that the FDIC is the one who insures bank deposits. And the current limit is $250,000. FDIC data shows $7.4 trillion of deposits are insured, but $10.5 trillion are not.

That may be fine, unless depositors yank funds from smaller banks, which are then forced to take huge losses on the low interest rate securities they purchased during the Great Financial Crisis because they can’t hold them to maturity (i.e. another SVB-type bank run).

When something goes sideways and I tell my wife that everything is “fine” and not to worry, she really starts to worry! That’s exactly what investors did yesterday.

My best guess is the market is going to continue to be on edge while waiting to see if the Fed’s savage pace of interest rate hikes really breaks something.

The weakness in financial stocks has been particularly hard on small-cap stocks owing to the high allocation to regional banks in the Russell 2000 (8% versus just 1% for the S&P 500). In contrast, the Nasdaq is pushing back up against the early-February high.

Thankfully we don’t have any exposure to small-cap financials. And with a few exceptions, our portfolio is taking all of this in stride.

Recent Changes


Enovix (ENVX) has continued to gain altitude in the wake of announcing that the board approved the design of the Gen2 Autoline (10-times manufacturing throughput versus Gen1) and that its first high-volume production facility (Fab-2) will be built in Penang, Malaysia. Shares closed at 11 yesterday. We’re looking for the stock to get back to 13, which is where it traded before the train wreck webinar in early January. HOLD

Expensify (EXFY) seems to have found support around the 7 level a couple of weeks ago. It’s moved slightly higher since but still isn’t living up to expectations. The company recently announced it has formed a steering committee of accountants to help steer product development in the right direction to meet the growing needs of the accounting industry. High on the priority list in 2023 will be chat, payroll and the Expensify wallet. HOLD

Flywire (FLYW) closed at 27.9 yesterday, fully recovering from the pullback that came after the modest rally that followed the Q4 earnings report. Shares are trading near the high end of a 23.2 to 29.3 consolidation range. Naturally, we’d like to see the stock make a convincing move above 29.3. On the Q4 call management said it sees 2023 revenue of $353 - $364 million (+34% at the midpoint) versus consensus of $349 million. BUY

Huron Consulting (HURN) gave back about two-thirds of the Q4 earnings rally but has come back some over the last week and is now 9% off its high. Shares found support at about 72.6, which was the upper bound of a consolidation range this past summer. We’re now looking for HURN to move back into the 80 to 83 zone (highs from December and early March). There’s no new fundamental news. On the Q4 earnings call management issued better-than-expected 2023 revenue guidance of $1.22 - $1.28 billion (+10% at the midpoint). EPS guidance of $3.75 to $4.25 straddles consensus of $3.98. BUY

Inspire Medical Systems (INSP) announced last week that the company received countrywide reimbursement approval in Belgium, effective immediately. This week it announced FDA approval to offer Inspire therapy to pediatric patients with Down syndrome. This opens the door to help patients ages 13 to 18 with an apnea hypopnea index between 10 and 50 that don’t have the ability to benefit from CPAP. HOLD TWO THIRDS

Intapp (INTA) hasn’t put out any newsworthy announcements over the last week and the stock still looks fantastic. Shares closed yesterday at 41.3, just 3% off their high. HOLD

Rani Therapeutics (RANI) provided a Q4 update after the closing bell yesterday. Most of the update was things we already knew. To recap a few things from Q4, the company’s Phase 1 RT-102 study (RaniPill GO for osteoporosis) achieved all of its endpoints with repeat doses being generally well tolerated and high drug deliverability. The company also held a pre-NDA meeting with the FDA and walked away with some confidence that an accelerated track, 505(b)(2), is suitable to develop RT-102 in the U.S. With guidance from the FDA Rani expects to start a Phase 2 trial for RT-102 in the second half of 2023. In January the company also announced a preclinical program partnership with Celltrion to develop RT-111, a RaniPill Go capsule containing a biosimilar of STELARA (ustekinumab) for the potential treatment of psoriatic arthritis, ulcerative colitis, Crohn’s disease and psoriasis. Celltrion has the right of first negotiation to acquire worldwide rights to RT-111 after a Phase 1 clinical trial.

Looking forward, we should expect a formal start date for the Phase 2 RT-102 study anytime after June. We should also look for the start of two additional Phase 1 studies at some point this year, including RT-105 (adalimumab biosimilar) and RT-110 (PTH for hypo-parathyroidism). The company has $98.5 million in cash and cash equivalents, which should get it through mid-2024. I don’t expect a significant move in the stock after this update. It will move more on trial results. HOLD

Repligen (RGEN) hasn’t done anything notable over the last week. Management spoke at the Keybank Life Science and MedTech Investor Forum on Tuesday, March 21. The stock’s chart looks roughly similar to that of larger life sciences peers Danaher (DHR) and Thermo Fisher (TMO). SOLD A QUARTER, HOLD THE REST

Sprout Social (SPT) is looking slightly better from a technical perspective. The stock’s 51 to 69.6 consolidation range that lasted from early November through the end of January has bumped up to a new trading range of 54.7 to 74. On Tuesday, SPT jumped above its 50-day line. HOLD HALF

Terex (TEX) has been banged up by the pullback in “old economy” type stocks that accompanied the sharp retreat in financials. Despite the stock’s ugly performance management sounded a bullish tone recently at the J.P. Morgan Industrials Conference, citing no abnormalities in terms of delayed orders or cancellations. As I mentioned last week the company will make a significant move in Q2 (starts in about a week) when major Aerial Work Platforms (AWP) production lines move to Monterrey, Mexico. This should add 2% to margins once fully operational, estimated to be late 2024. Stepping back, Terex is on track to be debt-free by mid-2024 (significant M&A could change that timeline) and has net debt of only about $471 million. Management has had the financial flexibility with growth in free cash flow ($152 million in 2022 and guidance for $225-$275 million in 2023) that there is room for more cash to go to shareholders in the form of dividend increase (recent 15% increase) and/or share buybacks ($97 million in 2022). In short, Terex seems to be on sound financial footing. BUY HALF

TransMedics Group (TMDX) is mostly unchanged over the last week and there’s no new news. The stock is about 11% off its recent high. HOLD THREE QUARTERS

Please email me at with any questions or comments about any of our stocks, or anything else on your mind.

Stock NameDate BoughtPrice BoughtPrice on 3/22/23ProfitRating
Enovix (ENVX)10/6/222011-46%Hold
Expensify (EXFY)2/2/23118-32%Hold
Flywire (FLYW)8/4/22 & 11/9/2221.622829%Buy
Huron Consulting (HURN)12/2/228076-5%Buy
Inspire Medical (INSP)10/4/1959242313%Hold 2/3
Intapp (INTA)1/4/23264161%Hold
Rani Therapeutics (RANI)10/7/21 & 7/28/22146-58%Hold
Repligen (RGEN)11/2/18 & 12/31/1859166181%Sold 1/4, Hold 3/4
Sprout Social (SPT)9/3/20366271%Hold 1/2
Terex (TEX)3/3/236047-21%Buy 1/2
TransMedics Group (TMDX)7/7/223474118%Hold 3/4
Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets and achievement of major developmental milestones.