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Tuesday, June 28, 2022

Little Guys Should Provide the Big Opportunities in Equities in 2022

Well, we’ve reached the time of year when we look at next year. I will post my Best Pick for 2022 in one of my Real Money columns next week. I will review my call for 2021, Air Products and Chemicals (APD) , and put on my Future Man hat for next year. APD shares have risen 10.8% this year, and adding in a dividend yield (counting all four payments) of just over 2% produces a total return of 13% for the year. Solid, if not spectacular.

For 2022? I think it will be time for the small guys to shine.

This year has been such a story of blubber as the Big Tech fat cats got fatter and slurped down all the market’s extra Cat Chow, but I think the worm will turn in 2022. Why? The Fed is reducing its asset purchases and by all predictions (even its own, if the dot plot is to be believed) should begin raising short-term interest rates. That’s a headwind for duration-laden names such as Big Tech, but a tailwind for the smaller guys, as long as leverage is not excessive.

If only I knew someone who focused on building relationships with senior managements at smaller companies and then telling those stories through words and pictures. Wait… that’s me!

I love my SMIDs (industry jargon for small-midcaps) and I will keep following them, writing about them in Real Money and for OHM Research in Sao Paulo (my LinkedIn is the best way to find my research) and hosting them on my series of Fireside Chats/Industry conferences. What a blast that was in 2021 — except for my complete lack of technical prowess.

But this stuff just comes up every day. I was working Wednesday on a deep-dive for OHM on Tesla’s (TSLA) troubles at its yet-to-be-opened Gruenheide factory, in Brandenburg near Berlin, and I thought to myself, wow! Tesla’s troubles with local environmental authorities present a living and breathing advertisement for Nano One Materials’ (NNOMF) M2CAM process.

Elon Musk got way out over his skis by deciding to build a battery plant (and rejecting European Union subsidies in the process) next to the assembly facility in Gruenheide and the local NIMBYists are raising Hölle about the amount of water the plant will use and the possible water contaminants, especially sulfates, that will be produced as part of the battery manufacturing process. The process of making electric vehicle batteries is far from green, and Nano One’s M2CAM process addresses that issue. For my interview with Nano One’s brilliant CEO, Dan Blondal, at Excelsior Capital’s Management Access Conference, please click here.

My last Fireside Chat conversation was with Ben Wolff, CEO of Sarcos Technology and Robotics (STRC) . Sarcos has had a nice little run since Ben and I chatted. Almost back to the $10 price where it was “de-SPAC’d” on Sept. 27, but not quite there yet. Sarcos’ Guardian XO and Guardian XT products not only possess incredibly cool tech, but also act as the force multipliers that employers need as so many employees are leaving the workforce.

From a stock price perspective, STRC has had a nice move in the past two weeks, Nano One hasn’t done much, and Exro Technologies (EXROF) and Vicinity Motor (VEV) — the respective CEOs of which, Sue Ozdemir and Will Trainer, appeared on another one of my Fireside Chats this year — have been relatively poor-performing stocks this year. That’s what happens when the little guy gets crowded out by the big guy. That said, I still I love Exro’s coil-driver tech as an enabler for powertrain electrification, a project it is working on with Vicinity for VEV’s coming EV bus offering. Watch my chat with Sue and Will here.

That’s the point. Smaller stocks require a bigger outlay of time on a potential investor’s part for due diligence, and not everyone has the time or inclination to do such homework. I get that. I do that research and post on the Web. Use it!

I am just fascinated by these smaller companies and will continue to travel the world to research them. It is so interesting to me to follow the link-ups and partnerships that define commerce. For instance, Sarcos has had a relationship with Delta Air Lines (DAL) (also an equity investor in STRC) for some time, as Sarcos’ Guardian XO powered exoskeleton would be a boon for Delta’s ground maintenance and baggage handling crew.

Traveling to do all this research has pushed my Delta status to the brink of Platinum, but I am not enamored of my seating for my GRU-NYC flight here on Thursday night. So, in addition to mentioning Delta to add another big-cap ticker to this column, I would make a personal plea to Delta’s CEO, Ed Bastian, who has appeared in several marketing videos for Sarcos. Ed, bubbeleh, help me out, please. As close to the front of the plane as possible. It’s a long flight! 

(Please note that due to factors including low market capitalization and/or insufficient public float, we consider NNOMF, EXROF and VEV to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.)

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