3 Small-Cap Stocks Shining Amid the Market Rout
During a week that offered few places to hide, these names managed to buck the broad selloff and appear poised to continue to deliver for investors.
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Stocks started September on an ominous note last week, to understate the carnage in the market to open the new month. Several poor jobs data points triggered more worries that the labor market could be cooling more than anticipated and the chances of a 50 basis points cut at the upcoming FOMC meeting ended the week as a 50/50 proposition.
The Nasdaq was pummeled to the tune of a 5.8% loss on the week, the tech-heavy index’s worst weekly performance since 2022. The small-cap Russell 2000 was right on the Nasdaq’s heels and the S&P 500 lost 4.3%, its biggest weekly loss of the year. Commodities got shredded and energy was the poorest-performing sector in the S&P as crude oil plunged to end the week barely above the $68/barrel level on the WTI.
In short, there were few places to hide during last week’s market selloff. However, a few small-cap stocks I have highlighted on these pages managed to turn in a winning week and are worth revisiting.
Self-Defense, Self-Defense
Let’s start with Byrna Technologies BYRN. I have mentioned this maker of non-lethal arms and ammunition a few times over the past year. Its stock jumped around 25% in last week’s market downdraft. Management at Byrna put out a disclosure that it expects revenues in the third quarter to nearly triple from the same period a year ago.
I don’t think I would chase the rally. However, if the market continues to show weakness, and BYRN pulls back 10% to 15%, I will probably add a few shares to my existing stake in the equity. There is a nice story unfolding here.
Keep Your Eye on This Biotech/Biopharma
Shares of Aldeyra Therapeutics, Inc. ALDX managed to gain around 5% last week despite a significant headwind for small biotech/biopharma stocks in the market.
A month ago, the company’s lead pipeline asset targeting dry eye disease hit the primary end point in a late-stage study and had no adverse safety signals. This should provide the necessary data to garner FDA approval. I expect the company to resubmit the marketing application around this drug by year-end and for it to be approved in the first half of 2025.
Upon approval, drug giant AbbVie ABBV can opt into an agreement to co-develop and market the newly approved treatment. This would involve a significant upfront payment to Aldeyra as well as milestone payouts and royalties.
Hitting the Mark
Finally, we have A-Mark Precious Metals AMRK, whose stock was up some 10% last week as gold easily outperformed the overall market. This company is quite profitable and one of several gold related plays I own in my portfolio, as I believe investor interest in the yellow metal with continue to grow. Especially, given the federal government's massive fiscal deficit, which no party appears ready to address.
A-Mark provides exposure to gold's returns without the risks associated with miners. The stock is a reasonable value, trading at 12 times forward earnings estimates with a 2% dividend yield.
At the time of publication, Jensen was long ALDX, AMRX and BYRN.
