Weekly Market Review with Tyler London

Introduction

• Presenter: Tyler London, Chief Analyst of Cabat Small Cap Confidential and Cabat Early Opportunities.
• Date: Friday, September 20th.
• Focus: Review of recent market activities and trends.

Current Market Overview

• S&P 500: Flat to slightly down after a new high due to the Federal Reserve lowering the federal funds rate by 50 basis points.
• Economic Data: Positive indicators such as falling jobless claims, strong regional business surveys, and a record high coincident economic index.

Federal Reserve Rate Cut

• Recent 50 basis point rate cut described as a "recalibration" or "makeup cut."
• No Federal Reserve meeting in October; next meeting on November 8th, post-U.S. presidential election.

Market Trends

• Rate Cutting Periods: Historically show volatility but stocks tend to do well in the absence of a recession.
• Data from JP Morgan: S&P 500 higher in each of the last five easing cycles (1 month, 3 months, 6 months, 12 months trailing basis).

Small Cap Stocks

• Impact of Lower Rates: Benefits small caps due to higher allocation to companies with floating rate debt.
• Russell 2000: Up for seven straight sessions.
• Small Cap Software & Growth Stocks: Performing well with falling interest rates, helping valuations.

Software Stocks Analysis

General Market Behavior

• Software stocks previously affected by rising rates due to high valuations.
• Pandemic and AI hype affected software market trends.
• Recent quarters showing improvement with more upward revisions than guidance cuts.

Notable Software Stocks

1. Doo (DCBO) - Small Cap Canadian Software Company

   • Learning management software platform with AI integration.
   • Expected revenue growth: 19%.
   • Expected EPS growth: 50%.
   • Momentum building, strong cash flow.

2. Clear Secure (YOU) - Security Identity Platform

   • Known for Clear Plus subscription in airports (Biometrics).
   • Expanding beyond travel into TSA pre-check and verified products.
   • Revenue growth: 24%.
   • EPS growth: 120%.

3. Klaviyo (KVYO) - Marketing Automation Platform

   • Specializes in data and AI embedded solutions.
   • Focused on retail and e-commerce market.
   • Strong performance with a recent 35% revenue growth.
   • Primarily serves Shopify, Big Commerce.

Conclusion

• Software stocks are showing potential for growth with the tailwind of falling rates.
• Encouragement to research and monitor the mentioned stocks.

Closing

• Tyler wished listeners a great weekend and promised future updates.