What I’m Thankful For

Happy Thanksgiving, everyone! [Wide Moat Daily]( What I’m Thankful For By Brad Thomas, Editor, Wide Moat Daily Happy Thanksgiving, everyone! I know I said it on Monday, but I’m truly hoping for great things for you today. Great traveling conditions, if you’re traveling. Great recipes that come out just right, if you’re cooking. A great time with family and friends regardless… And great expectations for the year ahead. I know I’m excited about what’s in store. I’ve been hinting at it the last few weeks, but finally, I’m able to tell you. On the morning of December 5, I’ll be hosting a [special event]( where I’ll unveil the next chapter of Wide Moat Research. For the first time ever, I’ll be profiling and recommending small-capitalization stocks. If you’ve read my work for any length of time, you know I’m a proponent of blue-chip dividend investing. Our flagship product, The Wide Moat Letter, is devoted to this strategy. But for the first time ever, we’ll be swinging for the proverbial fences. Our goal will be to find small, explosive investments with triple-digit potential. And today, I’ll show why now (right now) is the time to build out your portfolio of small-cap stocks. Unloved, Unseen Broadly speaking, it’s been a difficult road for small-cap stocks in recent years… While the S&P 500 bottomed in October of 2023 and – with help from the Mega Techs – went on to make new, all-time highs, small-caps have languished. In fact, it was only recently that the Russell 2000 reclaimed its former high, set almost three years ago. This underperformance has resulted in a large valuation gap with small-cap value stocks trading at only 11.1 times 2025 earnings per share ("EPS") estimates. Those same metrics for the S&P 500 are at 19.8 times. This valuation gap exists even though small-cap value stocks have almost double the growth rate of the S&P 500. Investors have become absolutely enamored with large-capitalization stocks. Chief among them are names like Nvidia (NVDA), Microsoft (MSFT), and Apple (AAPL) which carry market capitalizations of $3.3 trillion, $3.2 trillion, and $3.5 trillion, respectively, as I write. These companies have earned their market caps. They have been phenomenal earnings growers for years. But this has resulted in valuation multiples that appear ambitious… perhaps overly ambitious. Small-caps, put simply, look to be the more attractive value. And with all the attention on Big Tech, small-caps receive limited analyst coverage. With fewer eyes on these names, it creates the potential for “diamonds in the rough” to go unnoticed. Put another way, many small-caps have gone unloved… unseen. But I believe that is about to change… The Trump Factor I’ve been covering the incoming Trump administration’s policies a lot lately. But whether you voted for Trump or not, there’s a lot to be optimistic about if you’re a small-cap investor. If Trump can really do what he says he’s going to do – and with Republican control of both houses, it seems like he has a lot of room to run – then we’re in for very big, very positive changes in how the U.S. does business. Nor am I the only one saying so, particularly when it comes to the small-cap situation. Here’s Reuters on the subject: Expectations that Trump, along with a Republican Congress, can make good on his promise of business-friendly politics have been the latest tailwinds for small-cap companies. They have been in the spotlight since the U.S. Federal Reserve commenced its monetary policy easing cycle in September. And here’s Benzinga: According to the house view, small-cap earnings projections for 2025 are optimistic, with potential upside tied to fiscal stimulus and economic expansion. Additionally, small-cap companies, with their U.S.-centric operations, stand to benefit significantly from proposed corporate tax rate reductions, such as a potential 15% tax rate championed by Republicans. Even Trump’s proposed tariffs, it adds, could easily benefit U.S. small caps, according to WisdomTree investment strategy analyst Brian Manby. This only makes sense since they tend to be much more tied to the local economy than their larger counterparts. CNBC… Financial Times… MarketWatch… They’re all speculating about how high small-cap stocks can go from here. A Better Deal I don’t normally care what the talking heads say about a topic. They’re wrong far too often for my liking. But on this point, we agree. The opportunity for small-caps is here. I’m just going to add a caution, and it’s a big one. Even in the most beneficial economic environment, there’s always risk. In fact, small-capitalization companies are – by their nature – more volatile than their larger counterparts. The upside, of course, is growth… sometimes rapid growth. That’s why as we enter this new arena, we’ll be sticking with our mantra: Always insist on quality. Besides, I’m still convinced there’s risk in many of the Mega Techs. Nvidia, just as one example, has been a phenomenal earnings grower, it’s true. The company’s latest earnings were larger than the firm’s revenue from one year ago. But everybody already knows this. And its current valuation is off-the-charts optimistic, an imbalance that just keeps getting worse as time goes on. I’m much more comfortable investing in well-researched, well-managed, lesser-known companies and concepts that are just waiting to take off. If you’ve ever benefited from my research, or if you’re just curious to know which small-caps I’ll be recommending, I’d encourage you to join me next week. You can get all the information [right here](. Regards, Brad Thomas Editor, Wide Moat Daily [Wide Moat Research]( Wide Moat Research 1125 N Charles St, Baltimore, MD 21201 [www.widemoatresearch.com]( You have received this e-mail as part of your subscription to Wide Moat Daily. If you no longer want to receive e-mails from Wide Moat Daily, [click here](. You're receiving this e-mail at {EMAIL}. For questions about your account or to speak with customer service, call [(888) 415-6046](tel:18884156046) Monday-Friday, 9 a.m.-5 p.m. Eastern time. Or you can e-mail us at feedback@widemoatresearch.com. Please note: The law prohibits us from giving personalized financial advice. To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. © 2024 Wide Moat Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Wide Moat Research. 1125 N Charles St, Baltimore, MD 21201. [widemoatresearch.com](. 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