Small Company Stocks will Outperform the Market in 2024, Survey Finds

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LOS ANGELES, April 17, 2024 — Seventy-five percent of investors say small public company stocks will outperform most major stock indexes in 2024, according to results of the 2024 Small Public Company Investor Sentiment Survey, conducted on behalf of SNN Incorporated, a multimedia financial news and publishing company, and PondelWilkinson, Inc., an investor relations and strategic public relations firm.

Of the investors surveyed, 74% say they are investing in companies valued between $50 and $300 million market capitalization, while 26% are buying stocks across all sizes.

“Three-quarters of those surveyed expect small public company stocks to outperform most major stock indexes in 2024, with about half expecting this stock category to outperform bigger companies this year,” said Robert Kraft, CEO of SNN Network, parent company of the Planet MicroCap Showcase being held in Las Vegas April 30 – May 2.

“While a dichotomy currently exists between those who are bullish on small public companies and those who are less so, as indicated by higher gains achieved thus far into 2024 in larger-cap indexes, investors surveyed view small company stocks as sought-after investments in 2024 and said they are sticking with their investment strategies,” Kraft added.

Other key survey findings include:

  • Gains: More than half of investors (52%) expect to increase their small company portfolio in 2024, after one quarter of responders (27%) reported gains of 20% or more from this segment in 2023.
  • Sector outlook: Technology (27%), natural resources and energy (19%), and healthcare and biotech (10%) represent the sectors investors are most bullish about for 2024. These industry favorites remain unchanged from prior surveys.
  • Risk tolerance: Ninety-one percent of investors have a “moderate- to high-risk” tolerance when investing in small public companies, 51% and 40%, respectively.
  • Buy or sell: Eighty-nine percent of investors say their general time horizon for holding small public company stocks is typically long- (more than 6 months) to very long-term (buy-and-hold), 50% and 39%, respectively.
  • Investment benchmarks: Seventy-six percent of survey respondents say they also are buying small public company stocks listed outside the U.S. Additionally, survey respondents cited management teams (38%) as the most important criteria for investing, followed by profitability (37%) and stock price (17%).

“As more investors become interested in small company stocks, it is critical that management teams communicate transparently, effectively and consistently,” said Roger Pondel, CEO of PondelWilkinson. “Where companies communicate their value propositions beyond traditional channels also is important, especially since the survey revealed a wide range of media that investors use to identify investing ideas, including social media platforms and increasingly, select participation at investor conferences and quality sponsored research.”

About the 2024 Small Public Company Investor Survey
The online survey was conducted in December 2023 to gauge investor sentiment as it pertains to small public companies valued at $300 million market capitalization and under. Seventy-seven percent of survey respondents categorize themselves as individual investors, followed by institutional investors (11%), family offices (8%) and wealth managers (4%). Four in 10 respondents (42%) have 20+ years of investing experience, followed by 10+ years (28%), 6-10 years (17%) and 1-5 years (13%).

About SNN Incorporated
SNN Incorporated is a global multimedia and publishing financial news investor portal covering the small-, micro- and nano-cap markets by providing news, insights, education tools and expert commentary. Visit https://www.youtube.com/@PlanetMicroCap to subscribe to Planet MicroCap’s YouTube Channel to receive notifications of new CEO interviews, as well as the latest episodes of the Planet MicroCap podcast.

About the Planet MicroCap Showcase
Hosted by SNN Inc., the Planet MicroCap Showcase is an annual 3-day event for the microcap investing community, comprised of company presentations, 1×1 meetings and educational panels. Click here for more information or follow Twitter X and YouTube for important updates.

About PondelWilkinson
Founded in 1968, PondelWilkinson Inc. is a national investor relations and strategic public relations consultancy. The firm represents a wide range of publicly traded, pre-public and privately owned companies, from startups to large caps, and develops programs targeting both Wall Street and Main Street. For more information, visit www.pondel.com. Follow PondelWilkinson on X at @PondelWilkinson or LinkedIn.

Celebrating Achievement with Grace

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CNBC.com, on February 17, published a growth story about the best performing stock in the past 30 years. It wasn’t Apple, Tesla, Google or any of those mega tech companies that might at first come to mind.

The best performing stock for the past three decades, according to CNBC and others, happens to be one of our longtime client companies that we proudly have represented for all those years.

Those who know us recognize that we, as with this client, are humble, hard-working, and not into self-promotion or bragging. After all, we haven’t even written the company’s name in this blog yet.

Nevertheless, in a world where accomplishments are celebrated and recognition is sought after, the concept of bragging rights sometimes is warranted. In this case, it’s more about our client and acknowledging achievement … a nod to success without crossing the line into boastful hyperbole.

Over the years, we adapted to our client’s ascent, strategically advising the company as it grew from a microcap issuer with a U.S. retail investor base, to a global, large-cap giant, attracting prestigious institutions and many sell-side analysts. Tactically today, we are still issuing their press releases, hosting investor days, serving as point-of-contact for the investment community and news media, and advising on messaging for M&A and a host of sensitive, sometimes complex corporate matters.

Admittedly, we are bragging that our organization has been part of some of our client’s success on Wall Street. But we are boasting with the intention of embracing this opportunity to uplift and inspire. The well-deserved success our client has achieved reflects talented leadership and unwavering dedication to innovation and quality, while always keeping egos in check and having a sense of gratitude.

We are proud to embrace bragging rights like a badge of honor—not as a tool for self-aggrandizement, but as a symbol of hard-earned success, as we congratulate Monster Beverage Corp., along with our colleagues behind the scenes at PondelWilkinson. 

Roger Pondel, rpondel@pondel.com

Judy Lin, jlin@pondel.com

As the New Year Rolls In, So Do the Prognosticators

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It probably happens every year, but I cannot recall a time when so many pundits had so many opinions on how the market will perform in 2023. The funniest headline about the market’s near-term future was JP Morgan’s, “The End of the Affair.” It probably was written to catch attention, and in my opinion would have been more appropriate a year ago, referring to the bull market prior to last year’s downturn.

How do you think the market will perform in 2023?

Many of the headlines about the new year are positive and include such language as:

  • “Three Scenarios that Could Surprise Markets (on the upside) in 2023”
  • “Is a Stock Rebound in the Cards?”
  • “Inflation will Crash Much Faster than Expected”
  • “Comeback for Fixed Income”
  • “Economy will Avert Deep Recession”
  • “Fed Pivot Could Push Stocks Up by End of Year”
  • “Second Half of Year will be Up, Up and Away”
  • “S&P will Soar at Least 20%, Nasdaq at Least 30%”
  • “Fed will Pause Rate Hikes Sooner than Everyone Thinks”
  • “The Stock Market will have an Excellent Year”

But there also are naysayers:

  • “Wall Street, Meet Mud”
  • “A Strange Day is Coming to America”
  • “More rate hikes are coming”
  • “Stocks will continue their lows in 2023”
  • “Continued Volatility Ahead”
  • “Markets May Continue to Face Choppiness”
  • “Challenges Abound for Dow”
  • “A Stock Market Crash in 2023”
  • “Millionaires Predict the Market Will Get Much Worse”

With so many divergent views, what’s an investor or issuer to think, or more importantly, to do? Who should be believed?

I just counted the number of bullet points above, and there was one more positive than negative. A good sign, although I am not an analyst and my research was cursory at best. However, the sources are good and professional.

If you really want a forecast for 2023, you could always flip a coin.

Friederike Fabritius and Hans Hagemann wrote in in their book, The Leading Brain: Neuroscience Hacks to Work Smarter, Better, and Happier, that if you’re satisfied or relieved by a decision the coin made for you, then go with it. On the other hand, if the coin toss leaves you uneasy, then go with the other choice instead. “Your ‘gut feeling’ alerted you to the right choice,” they wrote.

So please, flip a coin if you will, but at least think positive thoughts. Good luck, and have a healthy, happy and prosperous new year.

Roger Pondel, rpondel@pondel.com

Investor Relations in a Bear Market

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Every great story deserves an engaged audience.

It’s a philosophy we deeply believe in at PondelWilkinson – So much so it’s splashed across our website banner and written on the back of our business cards.

And it rings true regardless of market conditions, even in bear markets, when the value of equities or other investments dip 20 percent or more from recent highs.

That happened around mid-June on the S&P 500, and while there’s little companies specifically can do to calm market forces, taking a proactive, non-promotional stance is the best course, according to PondelWilkinson CEO Roger Pondel.

“Retreating or staying purposely quiet is not a strategy that works,” he asserts. “Astute investors have their antennae up now, looking for good companies.”

In a bear market, investors go into safer stocks, explains PondelWilkinson Vice President Judy Lin Sfetcu, who adds some historical context to highlight her point.

During the dark months of the financial crisis of 2007 and 2008, when the S&P sank nearly 52%, investors flocked to companies with solid financials and established track records, abandoning companies teetering on insolvency.

“If a company has a good balance sheet, they should be messaging that to investors and Wall Street,” Sfetcu says.

Managing Director Laurie Berman views this bear market more as a reflection of investor sentiment, than company specifics, and a recent tally by FactSet provides some data points to back that up.

Through July 22, 2022, 68 percent of S&P companies in Q2 reported a positive EPS surprise, while 65 percent of S&P companies reported a positive revenue surprise.

Granted it was a small sample size (21 percent of total company results), but undoubtedly good quarterly metrics by several publicly traded companies.

Yet, as of press time, the S&P was down just over 13 percent for the year. The tech-heavy Nasdaq, down 21 percent this year, closed with the worst six month start on record, losing nearly 30 percent of its value through June, according to Yahoo Finance.

“If a company is being negatively impacted by macro issues, that company should be honest about what that means for its future, and importantly, what steps are being taken to try to insulate it, or use the macro issues to their advantage,” Berman suggests. “Highlighting certain areas that may give investors more confidence can be helpful.”

Analysts and other finance experts contend bear markets typically last between nine months and a year, so settle in for some continued volatility, especially as inflation, pandemic-led labor shortages, related supply chain constraints, and rising interest rates present ongoing challenges.

In the interim, here are a few more dos and don’ts to ponder:

  • Think responsiveness and transparency.
  • Message the company’s strengths: cash flow and balance sheet; client/customer relationships; resilience and history in prior down markets.
  • Message if and how current economic conditions are creating change for the company, positive or negative, including decision-making.
  • Be certain that investors hear regularly from c-suite executives, sometimes more than the CEO and CFO, on conference calls, non-deal roadshows (NDRs) and conference presentations.
  • Court and know key investors and their concerns, not just about your company, but about their portfolios.
  • Give investors reasons to hold your shares, or buy more.
  • Don’t feel defensive about a falling stock price, particularly if the company is still performing well. Investors know the reason.

“Resist the temptation to over-promise about the future,” says Pondel. “Be proactive about reaching out to new investors and participating in NDRs and conferences. They are not a waste of time, even in a bear market.”

Consider this blog entry a primer to a larger discussion on investor sentiment, a key topic we’re aiming to further develop into a whitepaper this fall, with insightful take-aways to help public companies improve communication and messaging during volatile times.

Chris Casacchia, ccasacchia@pondel.com

How PR Can Support Micro Cap and Small Cap Companies

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Ignorance is No Excuse: The Importance of Reg FD Training

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You may remember that Martha Stewart spent time in prison.

She served five months behind bars and another five months of house confinement at her 153-acre estate in New York, wearing an electronic monitoring bracelet, for selling 4,000 shares of ImClone Systems before news of the FDA’s rejection of one of ImClone’s cancer drugs was made public.

ImClone’s former CEO, Samuel Waskal, a friend of Stewart’s who presumably gave her the stock tip, served a seven-year prison term after pleading guilty to orchestrating stock trades, as well as to other corporate misdeeds.

How much insider trading is going on in U.S. stock markets based on material, non-public information? At least four times more than regulators actually catch and prosecute, according to research from the University of Technology Sydney. 

Could Reg FD training have helped either of them avoid prison sentences? 

We’d certainly like to think so. For Waskal, of course, he definitely knew better as CEO of a publicly traded company. Stewart may have never heard of Reg FD, but she should have known better as well, based on plain old common sense.

Whether you’re working at a public company for the first time, or you’re a seasoned pro, being aware of Reg FD (Regulation Fair Disclosure) and how to avoid missteps is vitally important. Many companies provide periodic formal Reg FD refresher training even for public company veterans. Not only does such training help prevent employees from disclosure pitfalls, but it also serves as a record that your company takes disclosure seriously.

Starting with the basics, Reg FD became effective more than two decades ago to help the SEC prevent selective disclosure of material, non-public information, remedying the perception of unfairness in communications throughout the investment community. One of the key principles of Reg FD is that information must be broadly distributed, not selectively disseminated. A good rule of thumb is to provide full disclosure to all … all the time.

What constitutes materiality? If there is a substantial likelihood that an investor would consider the subject important in the total mix of information when making an investment decision, and if it is reasonable to expect that the information could have an effect – up or down – on a stock’s price, it’s probably material.

Things to consider include receipt of a big contract, M&A, a stock buy-back program, a director or officer resignation, among many others. Materiality can be somewhat subjective though, so it’s important to communicate with your attorneys if there is any doubt.

There are two simple rules to follow to ensure you’re not running afoul of the SEC (and that you don’t wind up like Martha Stewart):

  • Never buy stock in your company, or encourage others to do so, when you are in possession of material, non-public information.
  • If you ever have questions about whether, and when, you, as an insider, can buy or sell your company’s stock, contact your CEO, CFO or legal counsel.

Keep in mind that while there are remedies for inadvertently disclosing material, non-public information, you should strive never to have to use those remedies. But, just in case, here are the steps to take should someone slip:

  • Let an authorized company spokesperson know as soon as possible, so that that person can work to promptly determine the nature and materiality of the selective disclosure. (Authorized spokespersons are required to determine the cause of the selective disclosure and take appropriate steps to reduce or eliminate the risk of recurrence.)
  • Within 24 hours of the inadvertent disclosure, or at the next opening of market session, a company may issue a press release or file Form 8-K with the SEC containing the material information that was deemed to be selective disclosure.

If it happened to Martha Stewart, is can happen to anyone. “It was horrifying, and no one — no one — should have to go through that kind of indignity, really, except for murderers, and there are a few other categories,” Stewart told Katie Couric during a 2017 interview on the Today Show.

Aside from providing Reg FD training to pre-IPO and newly public companies, along with refresher sessions, PondelWilkinson has been approved by the California Bar Association to provide one-hour Reg FD training sessions to attorneys for CLE credits. While we have to know the ins and outs to be effective trainers, we’d love to hear about your Reg FD experiences.

Laurie Berman, lberman@pondel.com

New Class-Action Lawsuits Lurking: Tips for ADA Compliance on Websites, While Doing the Right Thing

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Recently, several of our California-based clients received letters from attorneys who are allegedly representing disabled persons, stating that those clients’ investor relations websites are not fully WGAC and ADA compliant.

With each communication, the attorneys specifically cite “not compliant for blind persons.” In some cases, they are requesting remediation within a certain timeframe. In other cases, however, real monetary damages were sought.

Is this ambulance chasing or a real problem?

For blind people or those with low vision, images without text equivalents, certain fonts and colors, and PDF documents can make websites difficult to navigate.

According to the CDC, 61 million Americans live with disabilities. The U.S. Census Bureau says that almost 19 million Americans have difficulty seeing or hearing.  Many websites, including investor relations websites, do not currently make accommodations for these users.

For blind people or those with low vision, images without text equivalents, certain fonts and colors, and PDF documents can make websites difficult to navigate. A recent article from NBC News details efforts by disability advocates, including that “federal lawsuits claiming websites are not compliant with the ADA rose by 12 percent last year.” 

Companies, publicly traded or not, should do whatever they can to provide a solution, so as not to leave anyone behind, as well as to be compliant and reduce the threat of legal action.  Of course, regardless of the threat of legal action, it’s the right thing to do.

But where does one start? 

First, some basic definitions:

  • WGAC – Web Content Accessibility Guidelines – Developed in cooperation with individuals and organizations around the world, WGAC has a goal of providing a single shared standard for web content accessibility.
  • ADA – Americans with Disabilities Act – Put into law in 1990, the ADA seeks to provide equal opportunity for individuals with disabilities.

Second, there are several tools to determine how closely a website is to being compliant:

  • The WAVE Web Accessibility Evaluation Tool allows a company to identify accessibility and WCAG errors. Running a URL through the tool will provide summary of accessibility errors.
  • Similarly, Web Accessibility by Level Access allows a company to determine the “health” of a site. There are many others, some free and some paid. (We are not endorsing the veracity of any.)

Once a determination has been made that changes or additions are necessary to ensure WGAC and ADA compliance, here are some practical tips:

  • Take a look at the WGAC guidelines to familiarize yourself with the requirements.
  • Have your website developer (both for your corporate and IR sites) run your sites through a tool like those listed above to see exactly what changes need to be made.
  • Considering purchasing code (usually a widget) that helps makes your website more compliant. There are several, and again, we are not recommending any particular vendor. Be aware, however, that these widgets are not without issues (see the NBC News article referenced above and this one at Forbes.com) and are not a panacea.
  • Recognize that if your corporate site is accessible, but your IR site is not, you are out of compliance. Similarly, if the home page of your corporate site and IR site are accessible, but the pages beneath that are not, you are out of compliance. Even if everything looks great, but you haven’t remediated PDF documents posted to the site, you are out of compliance.
  • Remember that websites are not static.  Any time a change is made to content, links, colors, etc. you run the risk of non-compliance.
  • Work regularly with your legal team to ensure you’re on top of all current and future regulations and requirements.

Laurie Berman, lberman@pondel.com

SPACs: No Small Potatoes, and Still Growing Like an Idaho Spud

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It is nearly impossible these days to avoid SPACs, which most of you know by now stands for Special Purpose Acquisition Companies.

According to SPAC Insider, there were 226 SPAC IPOs from 2009 through 2019, compared with 248 in 2020 alone. No small potatoes as a financing vehicle, SPACs this year will experience yet another spurt of explosive growth.

Mark Y. Liu, partner at Akerman LLP, who hosted a recent webinar on the topic, said those 248 SPACs raised $83 billion last year. Amazingly, 550 SPACS were in registration as of March 31, 2021, looking to raise $162 billion more. And SPAC Analytics reveals that SPACs made up 55 percent of all IPOs in 2020 and 76 percent of those thus far in 2021.

Sometimes known as “blank check” companies, SPACs are typically publicly owned shell companies with no operations, but with mandates to acquire private operating companies, usually in a specifically stated sector. If the SPAC does not complete a transaction within 18-24 months, it is liquidated, and funds are returned to the company’s investors. 

Trend or a fad? 

SPACs are growing like Idaho spuds and loved by investors.

While the numbers appear to say “trend,” Business Insider recently noted that investor appetite for SPACs is declining. Additionally, SPACs have come under scrutiny by the SEC over reporting, accounting and governance practices.

On the other hand, and supporting the trend side of the equation, Goldman Sachs estimates that that SPACs could drive $900 billion in M&A enterprise value in the next two years, with nearly $129 billion of SPAC capital currently searching for acquisition targets.

James Keckler, from D.A. Davidson’s investment banking group, and on the webinar with Liu, noted a few things to watch for on the horizon. He believes SPACs and their acquisition targets will get even bigger; that celebrities will continue to increase their involvement with SPACs; and that there could be multiple companies involved in a SPAC merger, versus the typical one-to-one model currently being utilized. Does that mean conglomerate?

The real question:

Are SPACs good for sponsors, the acquired companies and investors? The answer according to Liu, and others, is a resounding “yes” for all three. 

For SPAC sponsors, the benefits include access to capital markets, founder warrants and common stock incentives, and the ability to use both cash and stock for acquisitions. For potential acquisition targets (this one comes from Covington Capital Management), the ability to skip the tedious process of filing a registration statement and bypass a roadshow is attractive. And for investors, the positives include redemption rights, $10 per unit liquidation value and liquidity. 

On the downside, and not that much different from any company going through the IPO process, are the costs of going public, the reporting requirements, market oversaturation, and as some industry watchers have noted, SEC scrutiny (although this could be a good thing for investors).

Whether one is a SPAC investor, merging a company into a SPAC, or forming one, below are a few sound principles to practice:

  • First, a public company is a public company. No matter the capital structure, management team or industry, all rules and regulations governing exchange-traded securities must be closely followed.
  • Next, it is vitally important that communications are complete and transparent, both requisites to build credibility and a loyal investor following.
  • Third, fourth and fifth, research the management teams and their backgrounds; understand what the investment opportunity is really about; and ensure that the language in all documents is easy to understand, with jargon kept to a minimum.

Lastly, although there are many more “secrets” that we readily share with our clients, please know that SPAC formation, merging, and investing are not necessarily quick ways to riches. Old fashioned performance, and maybe even going public through the tried-and-true method established by the SEC in 1933, usually will win out in the long-term. But for right now, SPACs are growing like Idaho spuds and loved by investors.

Laurie Berman, lberman@pondel.com

Roger Pondel, rpondel@pondel.com

Almost There and Entering Yet Another New Comfort Zone

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One year into the pandemic, it is clear that our personal and business lives have changed in so many ways, some of which will become permanent. We were forced to step out of our comfort zones, and what became a new comfort zone for many is about to change again, this time in a positive way. We are almost there.

Over the recent months, PondelWilkinson conducted an anecdotal survey among those with whom we regularly interface – corporate executives, analysts, business journalists, investors, among others. We asked about comfort zones and life changes.

Sans reciting statistics, here are some random thoughts of what we learned, in no particular order:

Photo credit: Roger Pondel
  • Most people are working odder and longer hours from their home offices, but with generally less stress.
  • We are seeing our clients much more often, albeit not in person.
  • Productivity has improved significantly, with no more time wasted on daily commuting and out-of-town business trips.
  • Zoom fatigue is far less taxing than jet lag fatigue.
  • Lunch times have gone to about 15-20 minutes from about 45 to 60 minutes, and to a feeling of almost being free from an average daily spend of about $15.
  • It ispossible to complete financings, including IPOs, 100 percent virtually.
  • It is possible to do a non-deal-road show in one’s pajama bottoms. “I will never do an old-style road show again,” quipped more than one CEO and CFO.
  • Activist investors built foothold positions during the early pandemic stages when valuations tanked. Today, those investors are beginning to flex their muscles and raise their voices.
  • Retail investors, with more time on their hands, are investing more and taking up more of management’s time.
  • A new investor spotlight is shining on ESG considerations, and companies need to pay attention.
  • Many annual meetings will remain virtual from now on. Chocolate chip cookies at those meetings are pleasures of the past.
  • M&A transactions came to a halt, but they are roaring back.
  • Fewer cocktails are being consumed. Huh?

Most respondents said we are “almost there,” meaning back to some degree of normalcy. But most believe that a majority of the populace will continue to wear masks for years to come, particularly on airplanes and in group meetings, and certainly for the remainder of 2021.

About stepping out of one’s comfort zone, my therapist wife is an advocate of doing so purposely, especially in times like these. While there has been no choice about accepting changed routines, she believes it is critical to proactively embrace them, along with seeking new challenges. More than that, she says, “It is proven that those who regularly step outside their comfort zones become more emotionally resilient and creative and hold distinct cognitive advantages over those who do not.”

Aside from working at home, I recently stepped out of my comfort zone in a number of ways. I have become a bird photographer on early morning jogs. I now bring out the garbage without being asked to do so, almost every day. I help with the dishes, almost regularly. And sometimes, I even surprise my wife by making the bed … a tip for which I must give credit to our long-time corporate counsel, Gary Freedman.  

“Increasing the number of tasks one can handle and doing altogether new things propels personal and professional development,” Fay Pondel says. “Getting comfortable with being uncomfortable stimulates innovation. Embracing the unnervingly unfamiliar opens oneself to accomplishing more than ever dreamed possible and leverages untapped potential.”

Are we back to normal yet? Almost.

Roger Pondel, rpondel@pondel.com