Big and boring remains the game. The small-cap momentum crowd is completely silent. There's a buyer's strike, a void of demand, in the late darlings of last year. SPAC has become spit. Names like Skillz (SKLZ) , one I happen to like on its long-term prospects, has an untouchable chart. I couldn't sugarcoat it enough to swallow it down even if I owned a Domino factory.
There will be some bargains that come from this as all the attention has turned to large-caps. There are hundreds of small-caps that have entered bear market territory with no signs of stopping. Is the economy reopening removing too many speculative traders that found their way into the markets in 2020? It's a theory I've seen mentioned, one I loosely discussed in the past as well in specific securities, but I didn't envision it pushing quite this far or broad.
I also didn't envision the hit we've seen on cannabis. That has been driven by some lackluster results as well as a White House that is pushing back on much-needed reform. At some point, old politicians will realize that they've lost touch with the reality that is cannabis. Unfortunately, it could take a few more years, which is disappointing. In the meantime, I'll accumulate names like Village Farms (VFF) , Cresco Labs (CRLBF) , Green Thumb Industries (GTBIF) , and Hydrofarm Holdings (HYFM) , among others.
Right now, there's no hurry to accumulate these, but a slow process is good.
The biggest challenge with the smaller names is we can see a flurry of news or a news void after an exciting piece of news. In the current environment, the void creates a challenge.
I've had a lot of questions on Draganfly (DFLYF) as of late. Unfortunately, as they work toward their move onto the Nasdaq combined with the end of their quarter, they're stuck in a quiet period at a tough moment. They simply can't say anything. Did they win any new contracts? We don't know because they can't say yet. How did the quarter look? Again, we'll know soon, but it's a void for now.
CurrencyWorks (CWRK) is another one with a similar problem as they shift Canadian exchanges. They're in a fast-moving industry with developments in that industry all over the place, but the company is muted until their move is completed. They are at the mercy of paperwork. For existing longs, it creates a void of news and some anxiousness. For those considering a position, it may make them hesitant.
And when a company exits the void, what happens if they immediately release stock moving news? Will it be too late to get in? Will the sidelines be the better place? In a strong, underlying market, these aren't questions we need to worry too much about, but when small-caps can't find a bid, the situation of risk and reward elevates on both sides.
I get the frustration. No one likes seeing a name they hold decline in value, but none of the names above are short-term trades for me. Those are names that I don't plan on selling unless the underlying fundamentals of the company change, and my bullish thesis is no longer valid.
