SMID Stocks Remain Stronger Than Large Caps

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Dear Jacob: In his Daily Market Notes report to investors, while commenting on the SMID stocks, Louis Navellier wrote:

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Q1 2021 hedge fund letters, conferences and more

SMID Stocks Remain Strong

Small and mid-capitalization (SMID) stocks remain stronger than large capitalization stocks this year. The Citadel algorithms that control stock prices remain hyper-sensitive to trading volume and the fact that small and mid-capitalization stocks have more explosive trading volume potential means that they have more appreciation potential than the large capitalization stocks that have been dominate in recent years. Reddit and Robinhood have recently exposed that when the Citadel algorithms are faced with thousands of orders, stock prices typically soar.

Some talking heads are trying for to scare investors that a stock market correction or crash is imminent. It seems unlikely. The economic data, sales and earnings environment, plus interest rate environment has never been more ideal. A mean reversion rally in recent months has also helped to lift some lagging stocks and essentially built a new launching pad for growth stocks.

Unwarranted Criticism From Warren Buffett On Trading Platforms

The Wall Street Journal recently reported that 41% of American households are invested in the stock market, a record high. Millions of new stock market investors opened brokerage accounts during the pandemic, thanks somewhat to Reddit and Robinhood. The criticism from Warren Buffett about these trading platforms was largely unwarranted in my opinion, but nonetheless, his comments should be heeded by speculative investors.

The first quarter announcement season has been stunning so far and is not yet over. I was expecting sales and earnings momentum to peak in the first quarter, but our small to mid-capitalization stocks are not showing any meaningful deceleration. Analyst revisions, on balance are moving higher, which bodes well for more big earnings surprises.