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The Small-Cap Rally Is Not Over

12/3/2023

Almost all of our covered companies benefited from the small-cap surge in November.

In the last issue of the SmallCap Informer, I wrote that the low valuations being assigned by the markets to small-cap stocks suggested that a turnaround for this market segment was long overdue.

I also reiterated my long-held view that the strength of the economy was being underestimated by the majority of market participants. Once the consensus on the economic outlook turned favorable, I predicted, investors would be more confident about taking advantage of the attractive valuations of small company stocks.

On November 14, 2023, this belief proved correct. That day’s news touted the strengthening economy and weakening pace of inflation in October, and markets responded favorably with a small-cap mini-rally. The S&P SmallCap 600 index rose 5.4% for the day. From October 30 through November 20, 2023, the S&P SmallCap 600 rose more than 10%, reversing a long period of languishing prices.

Nearly all companies covered in the SmallCap Informer benefited from this small-cap surge. From the time of publication of the November issue through November 27, 2023, 40 of 48 companies covered in the newsletter posted gains ranging from a modest 1.3% to a whopping 27.2%.

As of November 22, 2023, SCI picks are now up a cumulative annualized 15.2% for the year-to-date, compared to a benchmarked 2.2% for the S&P SmallCap 600 index. Our lifetime performance continues to be exemplary, with our focus on well-run smaller companies helping to boost our results over small-cap market averages. (See the Track Record page on the SCI website for updated and more detailed performance information.)

There is still time to benefit from further small company stock recovery, with a number of well-managed businesses in the SCI coverage list still selling at exceptionally-reasonable prices.

We urge subscribers to maintain a disciplined approach to portfolio management and ensure that small company stocks are not underrepresented, especially at this point in the market and economic cycles.

The “Best for New Money” selections in this issue are a great place to begin for researching possible candidates that fit into an existing portfolio’s sector and industry allocations.

* * *

In this issue of the SmallCap Informer we revisit a company previously covered that is moving right along on the growth track.

We also discontinue coverage of a company that has not lived up to expectations, a company for which recovery is too far off to justify tying up capital at this point.

On behalf of our entire team, we wish you the best for the upcoming holidays. And as always, stay the course!

  • DOUG GERLACH

Subscribers can read Doug's complete commentary and the in-depth profile of our recommended small company stock in the December 2023 issue of the SmallCap Informer stock newsletter. Not a subscriber? Subscribe to the SmallCap Informer and get monthly small company stock recommendations and updated buy/sell prices for each of the 48 high-quality small company stocks currently covered in the newsletter.