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  5. HPS.A: Hello, Hammond Power stock has been so strong ( $52 to $82 ), within a span of less than 2 months. [Hammond Power Solutions Inc. Class A Subordinate Voting Shares]
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Investment Q&A

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Q: Hello, Hammond Power stock has been so strong ( $52 to $82 ), within a span of less than 2 months. We have a very small 0.60% position, started around $57. Based on your favourable view and analysts' commentary, we want to build the position up to at least 1.5 - 2%. Recently stock has traded in $78-$82 range. Would it make sense to start accumulating in $75-78 range, or wait until next quarter ? Market strategists believe that small cap stocks have a lot of room to catch up. We are just a little concerned with HPS.a stock's incredible 200% + rise, this year and a possibility of stock to falter, for any reason. Thank You
Asked by rajeev on November 30, 2023
5i Research Answer:

There are never any guarantees, but small caps (as a group) have a long way to go to catch up. Typically they trade at a premium to large caps (because they are growing much faster) but are now very cheap. Case in point, HPS.A, despite its growth, is only 16X earnings, despite per-share earnings nearly quadrupling in the past three years. It is also debt-free. Typically, we have made way more money buying stocks that have gone up than trying to catch ones on the way down. As market cap breaks $1 billion ($955M now) there is also often a new group of investors who starts looking. We can't comment on personal weightings but we would be OK adding to a small position. We expected it to consolidate a bit, but with markets surging it just may not. As guidance our growth portfolio position is about 2.5% now and we are comfortable there.