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  5. DRX: Hi, All above stocks have been beaten down over past few weeks, after a strong run. [ADF Group Inc. Subordinate Voting Shares]
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Q: Hi, All above stocks have been beaten down over past few weeks, after a strong run. They are now trading at much lower valuations compared to their larger industry peers in Canada and US. Power Infrastructure, Construction, Industrial and Banking sector have been in a steady uptrend for most of this year and growth is expected to be solid in the foreseeable future.

Just wondering, if they are simply following the trend in US markets where small caps continue to lag the market. What are your thoughts and do you see the trend reversing anytime soon ?

On a different note, ADF Group stock is now trading below $17.31 ( price at which the owners sold some shares recently } and Terravest trading below the recent secondary at $74.25. Some investors seem to be freaking out ?

Thank You
Asked by rajeev on June 20, 2024
5i Research Answer:

It is true that these small-cap names despite solid performance in the underlying business have once again been ignored by most investors. Investors' sentiment could change overnight, and we tend not to time whether small or large caps will do better in the near term, but pay attention to each business individually. We think the current valuations of these names have once again become attractive, and we have been a big fan of these businesses and the prospects of these companies are largely unchanged if not better. We would be okay to add to all the names at the current prices. There might be some pre-June 25 tax selling here, and generally the Canadian market continues to massively lag the US, in addition to small cap general underperformance of late. 

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