Small caps are finally having their moment — and according to Greg Dean, Founder & Lead Investor at Langdon Equity Partners, the opportunity set may be bigger than most investors realize. In this episode of In the Money with Amber Kanwar, Greg explains why he focuses exclusively on global small-cap companies and how he searches the world for businesses that can potentially double over the next 3–5 years. He shares the disciplined framework behind his strategy, why he avoids highly leveraged businesses, and why volatility and market stress often create the best entry points for long-term investors.
Every year when the weather reaches double digits in March I allow myself to dream that winter is over and the days will continue to be warmer and brighter. Intellectually, I know this is false hope and second winter is around the corner. It could come as early as the weekend or in the form of a snow dump in April. But for now, I’m allowing myself to fantasize about the prospect of not having to keep track of 3 pairs of gloves and mount an Olympic workout just to get the kids in snowpants and out the door.
Here are five things to know:
Reality distortion field: Markets were taken for a ride yesterday after US President Donald Trump said, “I think the war is very complete, pretty much” and the US is “very far ahead of schedule.” Anyone with eyes can see that is not the case, but I guess the markets don’t have those. Oil went from nearly $120/barrel to $80/barrel in a single session. US stocks all finished higher. This morning futures are down by 0.3% and oil is hovering around $90/barrel. Since the war began last week there has only been one area to hide out in: tech. Investors went crawling back to a sector they abandoned in favour of the great rotation into other areas. Gold offered uneven shelter oscillating between gains and losses and is down 1% since the conflict broke out. In order to alleviate the oil supply crunch, the US is weighing lifting Russian oil sanctions. G7 energy leaders will again discuss releasing strategic petroleum reserves in order to offset higher prices today.
In AI we trust: Shares of HP Enterprise are reversing their pre-market gains despite better than expected results and a raised profit forecast. Demand for AI hardware is helping to propel the better outlook as the company touted a $5 billion AI backlog. While AI demand is helping the business, HPE is also wrestling with higher memory chip prices and supply shortages. Yet, gross margins surprised higher in the quarter and the company touted its ability to raise prices and pass the cost on to customers.
Take flight: Watch shares of Transat at the open after the airline posted higher sales than expected and a lower loss ahead of the results of a proxy battle this morning. Demand for trips to sunny destinations helped to power the beat. The results may take a back seat to the proxy battle which is playing out this morning. The company is holding its AGM and investors are voting on whether to accept a new slate of board members proposed by billionaire Pierre Karl Peladeau. The proposed changes would give Peladeau effective control of the board despite owning less than 10% of the company. Two of Transat’s largest shareholders have backed the company’s slate. Last week, proxy advisory firm ISS recommended voting against Peladeau’s slate. As of this writing, the results of the vote are not out yet.
Bargain hunting: Kohl’s is falling after sales missed expectations overshadowing a beat on the bottom line. Sales at Kohl’s dropped nearly 3% which was worse than the 1.2% expected. “Part of KSS strategy was to bring value back (expanding the coupon to more products/brands through the fall, and adding back entry point prices through private brands),” wrote Michael Binetti of Evercore, But the company seems to have lost ground in 4Q noting a need to better align promos to increasing consumer value needs.”
Notable calls: Air Canada is being downgraded at Scotia this morning on fuel price uncertainty. Unsurprisingly, the war in Iran means fuel consumers like airlines could be pinched. Higher fuel prices “could negatively impact margins and maintain pressure on the stock at least in the short term,” wrote Konark Gupta of Scotia. He warns that Air Canada could be forced to reduce or suspend its financial forecasts altogether if energy prices remain this elevated. Veritas is upgrading Cenovus to buy and downgrading Canadian Natural Resources to reduce. Higher crude prices and impressive progress integrating MEG Energy are reasons Veritas is now bullish on Cenovus. Meanwhile, much of the rally in crude is already reflected in Canadian Natural Resources, argues the analyst, and he is moving to a reduce stance given the stock has outperformed. Rivian is getting upgraded at TD Cowen ahead of the launch of its midsize SUV. The analyst believes there is upside to the demand for this vehicle. CrowdStrike is higher in the pre-market after Morgan Stanley upgraded the stock to buy. While the analyst notes valuation is expensive, they believe the cyber security company is a “durable platform winner from favourable AI positioning.”
Don’t miss our next episode. What happens next with the energy trade? Get your questions in now! Email questions@inthemoneypod.com
