As we approach the final trading day of 2021, we see a market in a period of relative calm after what felt like a very volatile November and December, especially for those invested in individual stocks.
The year-to-date performance shows the S&P 500 up 27.8%, with the value component up 22.6% versus +27.8% for the growth component. By sector the big outperformers were energy (+46.5%), tech (+35.3%) and financials (+33%). Underperformance was seen in utilities (+13.2%), consumer staples (+13.5%) and industrials (+19.2%).
Sliding down the market cap curve to small caps, the S&P 600 Index has posted YTD gains of 25.4%, just 2.4% below gains in the large cap index. Interestingly, value and growth flipped positions in the small cap arena. Small cap value is up 29.3% YTD while small cap growth is up 22.4%.
I believe much of the large versus small and large growth versus small growth performance differential is due to the dramatic outperformance of large cap megatech (GOOGL, MSFT, AAPL, etc.).
Another notable difference between the large and small-cap indices was the duration of the respective rallies. Small caps did very well in Q1 (Dec – March), extending the rally from Q4 2020. Since March, small caps have been going sideways. Nine months of no net gains has felt very long indeed. The upside is that if the economy can get past the current wave of Covid relatively unscathed then we could see a decent rally in small caps heading into spring.
In contrast to the Q1 small-cap rally and subsequent nothingburger, large caps have been grinding higher all year, with a few very normal looking dips (none greater than -6%).
By sector, small caps were led by the same sectors that led in large cap, namely energy (+63%), consumer discretionary (+37%), tech (+28%) and staples (+28%). Underperformance was seen in health care (+7%) and materials (+18%).
I’ve been trying to think of some clever way to summarize the past year that incorporates everything we’ve been through as investors. But honestly the best I can do is to say it was another really messed up year.
There have been so many nuances to every major factor affecting the market that this guy is more than happy to kiss 2021 good-bye!
In terms of our portfolio, the last week has been unremarkable in every respect. This isn’t too surprising given that many market participants have likely stepped back from the market, and trading volume is light.
No stock has really done much, with the exception of some strength in Kornit Digital (KRNT), +8%, JOANN (JOAN), (+7%) and SiTime (SITM), +6%.
We have also seen Arena Pharmaceuticals (ARNA) creep a little higher as we look for that stock to trade up closer to 100 as confidence in the acquisition by Pfizer (PFE) increases.
Without any stock-specific news of note, I’m going to take advantage of the lull and skip position updates this week.
It’s hard to express in writing how much I appreciate your support and the insightful and engaging messages you send throughout the year. Please keep them coming. Despite the challenging investing environment for small-cap investors in 2021, I hope it has been a relatively good year for you and that you’re looking forward to a better one in 2022. I know I am!
Happy New Year,
Tyler
Recent Changes
None
Please email me at tyler@cabotwealth.com with any questions or comments about any of our stocks, or anything else on your mind.
| Stock Name | Date Bought | Price Bought | Price on 12/30/21 | Profit | Rating |
| Arena Pharmaceuticals (ARNA) | 2/2/18 | 39 | 93 | 139% | Sold Half, Hold Half |
| Avalara (AVLR) | 2/1/19 | 40 | 134 | 234% | Buy |
| CS Disco (LAW) | 9/2/21 | 57 | 37 | -35% | Buy |
| Everbridge (EVBG) | 12/2/16 | 16 | 68 | 340% | Hold |
| Inspire Medical (INSP) | 10/4/19 | 59 | 233 | 298% | Buy |
| JOANN (JOAN) | 8/6/21 | 15 | 11 | -32% | Buy |
| Kornit Digital (KRNT) | 3/4/21 | 102 | 151 | 48% | Buy |
| Rani Therapeutics (RANI) | 10/7/21 | 17 | 18 | 8% | Buy |
| Repligen (RGEN) | 11/2/18 and 12/31/18 | 59 | 264 | 346% | Hold |
| Revolve Group, Inc. (RVLV) | 4/1/21 | 46 | 57 | 26% | Buy |
| Shutterstock (SSTK) | 11/4/21 | 121 | 114 | -6% | Buy |
| SiTime Corporation (SITM) | 12/2/21 | 296 | 295 | 0% | Buy |
| Sprout Social (SPT) | 9/3/20 | 36 | 95 | 160% | Buy |
| Thunderbird Entertainment (THBRF, TBRD.V) | 5/6/21 | 3.8 | 3.5 | -10% | Buy |