The turkey hangover can last several hours or even up to a few days. You have overindulged and need to digest for a while before you’ll even consider stepping back up to the buffet. But, if you’re anything like me, when you do go back for more your stomach has expanded and appetite has increased.
Investors seemed to suffer a Thanksgiving rally hangover early this past week. It took some time to digest the war in Gaza, slowing inflation and an increasing risk appetite. It also took rolling the calendar from November to December. In the end, however, once the appetite returned on Friday, markets took off.
Is this the beginning of an extended rally in micro-caps? I’ve been saying that the XBI, a great proxy for beaten up microcaps in my opinion, was breaking its downtrend and could rally into year end. Thus, I’ll stick with that call. The sun is going to shine on stocks that haven’t seen the light of day in a long time. I think a risk-on rally is starting.
Where to invest? At the risk of getting repetitive, I’m investing in companies with strong balance sheets and upcoming catalysts. My top names, which were discussed in more depth last week (The Outlook for December), remain Anixa (ANIX), Atomera (ATOM), enVVeno (NVNO) and INmune Bio (INMB).
Which doesn’t mean there’s not opportunity elsewhere. A rising tide lifts all ships and the stocks that are the most beaten down can bounce the furthest. This past week saw TFF Pharma (TFFP) rally 22%. It’s now three weeks and 75%(!!!) from its lows. And, still dirt cheap.
Two new board members were announced this week by TFF. There’s a saying that insiders sell for many reasons but only buy for one. Well, the same with (high quality) board members. They can leave a board for many reasons but will only join for one; they like the prospects of the company.
I believe the two new board members are a nice endorsement of a beaten up company. Data is coming on both phase 2 programs later this month and it’s open label. I’m quite sure the new board members had a peek under the covers before jumping in the bed. Despite needing money, TFF is poised for a continued rally from here.
Also bouncing nicely this past week is another biotech with great data and a bad balance sheet. IN8bio (INAB) rallied 16% and is poised to continue this run into data at ASH.
What are we looking for? If they have data on seven patients lasting more than a year with CR (complete remission), that would be about the most meaningful thing we could see. There’s a financing in their future, which caps near term upside, but like many biotechs it’s so cheap relative to their potential that dilution could be easily tolerated by investors.
Friday was the worst day for hedge funds as a group since 2021. As a group, they have limited exposure to the riskier names and, in many cases, are short them. More fuel for the fire as we head into year-end.
Lest you think that the rally in micros doesn’t have a lot of room to run, check out this list of gains needed to reach the 52 week high for each of our companies. While I understand some have stubbed their toes and/or diluted investors, there’s still a lot of room to run…TW Research's Disclaimers & Disclosures: TW Research may have been compensated for writing this article. For a full list of disclaimers and disclosures, please visit http://