[Music] hi I'm Tyler London I'm the chief analyst of cabat small cap confidential and cabat early opportunities here with your cabat weekly review it is Friday September 20th and just after the market has opened uh it's not showing up here on this chart of the S&P 500 but the broad Market is flat to slightly down here at about 9:40 a.m. now of course Market was up nicely as you can see here the S&P 500 broke out to another new high of course the Tailwind for that was that on Wednesday the Federal Reserve lowered the federal funds rate by 50 basis points also yesterday Thursday we received good data on good economic data jobless claims fell two Regional business surveys showed strengthening in September and the August reading of the coincident economic index Rose to a new record high so take that all and you're like well maybe the FED didn't need to such a dramatic cut uh but on the other hand the pressure now is off for a little bit there had been talk about how the Fed was maybe behind the curve by not cutting in July of course because there was no meeting in August there was no change to policy in August so perhaps this 50 basis point cut this past week uh was a recalibration those were pows terms some think that is another word for a makeup cut which is probably pretty accurate uh but now there's no Med in October so the FED is going to deal its next hand on November 8th that is just 2 days after the US presidential election this 50 basis point cut probably gives the uh the fomc a little bit of wiggle room at that meeting now let's step back and think about the market here okay there is some data showing that Ray cutting periods have some volatility but realistically when is there not volatility these days in the market bigger picture when there is no recession stocks tend to do well from the start of a rate cut cycle that recession you know caveat obviously is a big one but at the moment things look pretty good in the economy I looked at some data from JP Morgan this morning they noted that in each of the last five easing Cycles the S&P 500 had been higher on a one month 3 month 6 month and 12 month trailing basis so pretty bullish there you can see uh this chart just started ticking uh here with the S&P 500 now showing down 0.15% and again it's about 9:40 a.m. eastern time so the market just opened now again headlines small caps are back in the headlines uh the reason is the lower rates are very good for the S&P 600 small cap index and the Russell 2000 both have a much higher allocation of companies with floating rate debt variable rate debt than are in the S&P 500 large cap index so as interest rates come down financing costs for those companies come down and again disproportionately benefits smaller companies uh the Russell 2000 has been up for seven straight sessions let's go to a small cap chart here after the NASDAQ as you can see NASDAQ about flat on the day pushing up against resistance here right around that 18,000 Mark not quite to an all-time high um but certainly looking pretty good here is thep 600 small cap index uh down marginally today but again uh pretty nice stretch here going into the fomc meeting and definitely small caps looking to push through this resistance in the 14 call it 1435 to 1465 range uh which would Mark a new high for the year of course now one of the reasons again for small cap strength is the high allocation in the indexes to uh companies with variable rate debt another area because you know for me small cap growth investor primarily um not getting into utilities that heavily or Industrials and that although we do have some of that exposure we really are focus more on growth names and small cap software and midcap software are an area of Interest right now those companies tend to do well when interest rates fall because it helps valuations now we look at software stocks they really really got beat up when the Federal Reserve started raising interest rates they traded at high valuations there was a lot of excitement during the pandemic about uh Cloud software and software in general when the AI hype train began it was largely focused on Hardware semiconductor and infrastructure Tech stock Nam so a lot of the peer playay software names especially in the small and midcap area they continue to suffer it didn't really help that small and midsize businesses weren't doing that well those areas of small cap software called SNB uh area of software that customer base was struggling that led to numerous downgrades over the quarters and that even extended into the first quarter of 2024 now of course we just got through the second quarter earnings season a couple of weeks ago software stocks have been holding up much better the economy seems to be doing okay interest rates as we just discussed they're falling that's a Tailwind for valuation and we now have a little bit more clarity on how a lot of these software businesses are evolving and how AI fits into the mix also as we look back at the second quarter earning season there were more upward revisions and then guidance cuts that marked a change in that pattern partly because of how management teams Lowered Expectations in the first quarter but still more upgrades than Cuts is a benefit uh to positive and now sentiment towards software stocks is definitely improving if we look at a chart of one of the broad-based ETFs this is the uh cloud computing ETF clou as you can see it's not like a runaway train or anything but up against resistance here overhead resistance at about 20 20.5 which is where this ETF got to in July and then again in August and again I'm not saying that this is a bullish chart but it's certainly positive and with this Tailwind of rates falling I do think there's a pretty good probability of this ETF and other Cloud software ETFs bursting out to the upside and of course what we want to do is look at some of the more attractive names in those TF to play that Trend so we're going to get into three small and midcap software stocks now again these are not official recommendations but they are stocks that I think are interesting and they're certainly on my radar and I think should be on yours so let's move on to the first one this is Doo I don't know anybody that knows this company's name uh but it is a small cap Canadian software company ticker symbol is D CBO market cap here is as you can see 1.4 billion right up in this area uh like I said small Canadian company uh they have a learning management software platform that is disrupting that market uh pretty easy to use learning platform their Solutions have artificial intelligence baked in and they're used by learning admin teams to centralize learning materials that are used by both internal employees as well as external partners and customers now that is a trickier use case for a lot of these types of products but Doo has done a pretty good job and is excelling in that area of the market uh and there are a lot of use cases there so that's good for that area of U Market again big picture it's a play on the trend to make employees and partners more productive better equipped to do their jobs and move their organizations forward pretty easy to wrap your mind around that it's also a highquality company generates Positive Growth um profitable growth Revenue should be up around 19% this year here and EPS should be up by about 50% to 95 cents a share Doo maybe eyeing Acquisitions it has good cash flow it has 82 million in cash in the bank and it seems like momentum is building as you can see on the chart uh it's been going north for the last couple of weeks and looks like it's trying to move up through this 4546 area all right next up is clear U uh bit of a high flyer here Market cap of 4.5 billion uh ticker symbol Yu uh I said the company's name was clear U it's clear secure ticker symbol is you uh what do they do so they have a security identity platform most people are going to recognize this when they're traveling it's clear Plus subscription product uh you see it all over airports it has Biometrics it helps speed things up when people are going through airport security but uh clear is also expanding Beyond travel the big takeaways from the second quarter earnings report are that even though there is some softness in the domestic travel Market clear's bookings were better than expected they're also scaling up their TSA pre-check uh and verified product that's surprising to the upside there's momentum around improving the member experience with things like a Perks program and new technologies like pH first are finding their way into Solutions it looks like the company should have a pretty good second half of 2024 I think that's why the stock has been doing so well lately as you can see coming out of this earning report in early August uh big breakout there and then a significant upside move so a lot of people understandably a little bit hesitant to buy a stock that has a chart like this um again we're not getting into official buy recommendations and all of that but I think it's a compelling company uh and it's worth doing a little bit more research on it when we look at what analysts expect for the year they see Revenue growing by about 24% % earnings growing by about 120% so big upside there uh EPS of about a127 this year I mean that's obviously impressive growth and profit for a company uh with a market cap of about 4.6 billion all right last but not least is clavio ticker symbol here is KV yo and little bit of a bigger company market cap is almost 9 billion clavio has a marketing automation uh platform that helps customers generate returns from their marketing Investments company also is a data specialist this feeds into its AI strategy of course a lot of AI relies on data uh to do what it does the AI product development road map is focused on prod uh productivity tools that are baked into solutions to help optimize marketing campaigns a lot of this is done through emails and text messages and there are more strategies that are being developed that leverage both of those um modes of communication together there is not a specific AI product that clavio is monetizing at this point again it's more like the technology is baked into all of its Solutions its products are geared toward the retail and e-commerce areas of the market that's where about 95% of Revenue comes from so absolutely if you're interested in clavio be thinking you know retail e-commerce those are the markets where it plays its products were designed for online stores on Shopify big Commerce and mag but Shopify is where most of the action is these days the company put up a pretty impressive second quarter beat reported on August 7th which drove this big upside rally the stock was up 30 almost 33 and a half% that day uh again August 8th was the day after reported reported on August 7th uh management reported Revenue growth of 35% to 222 million and earn his growth of 67% to 15 cents a share that puts the company on track to grow both the top and bottom lines this year in the 30 to 35% range with some upside potential so clearly another pretty attractive profile uh for that software stock all right guys that's three software stocks that's it for me hope you have a nice weekend and uh we will talk to you next week take care [Music]