Think companies can’t raise prices? Think again, says this manager, who offers 3 choices of small cap stocks.

What happens after a dramatic drop in stocks followed by an astonishing rebound? Stock futures haven’t done much so far on Tuesday, as investors await testimony on Capitol Hill from Federal Reserve Chairman Jerome Powell (see the buzz for more on this).

While the market has decided, for now, to look past any inflationary threat, as the Fed continues to tell us it’s transitory, this action has created a blind spot among investors, our call of the day by Mary Lisanti, president of Lisanti capital growth and manager of the Lisati Small Cap Growth Fund ASCGX,
+ 2.35%.

“There is a firm belief that companies will not be able to offset costs by raising prices, and that is absolutely not true,” especially in areas that have seen their capacity disappear, Lisati told MarketWatch. in a recent interview.

The pockets where businesses can likely raise prices are in retail outlets and restaurants, which have seen tons of businesses shut down, while building materials and semiconductors are in demand, but no one is building. new factories. Think of cyclical companies that have more secular than cyclical pricing power and growth engines, or secular growth stories that can generate growth and lead the way to profitability, the research veteran said at small caps for over 36 years.

It also predicts a clear market for stock pickers, as stocks simply cannot continue to rise in a straight line. “I think the big story of the markets is that there is going to be more dispersion, so it should be better for active managers,” she said.

Lisati appeared in this column about a year ago, with recommendations such as feed manufacturer Freshpet FRPT,
+ 1.22%
and Five9 FIVN cloud contact center,
-0.17%,
both up over 60% year on year. His fund returned around 54% year on year and 24% on a three-year annualized basis.

The one she is reporting now is SI-BONE SIBN,
+ 1.72%,
an orthopedic group that has developed a minimally invasive way of treating disorders of the sacroiliac joint. The company has strengthened its sales force during the COVID-19 pandemic and offers a “highly differentiated product” that targets a large market. “We think this is one of those with a clear path to profitability,” and not just pent-up pandemic demand as proceedings have been postponed, she said. Shares are up 5% year-to-date.

Lisanti also likes MasTec MTZ,
+ 3.36%,
which assists in the installation, construction and upgrading of communications, energy and other infrastructure. The company has a “huge tailwind,” in the midst of a big change right now to “try to fix the network” and modernize the infrastructure, she said. It’s a big cyclical game because it’s tied to a lot of age-old global trends, such as 5G, and MasTec has little competition, she added. Shares have gained 51% year-to-date.

Finally, there is Chart Industries GTLS,
+ 2.62%,
which the fund manager described as a ‘one-off energy infrastructure game’. The company is a manufacturer of liquefaction and cryogenics equipment for clean energy applications. “They call it cryogenic equipment, but it’s highly technical equipment that basically allows them to freeze and transport industrial gases. And this is absolutely essential for the energy complex and in other areas, ”she said. Shares have risen 16% so far in 2021.

Brent touches $ 75 and the Fed chair on tap

US ES00 equity futures contracts,
+ 0.09%

YM00,
+ 0.03%

NQ00,
+ 0.23%
are not going anywhere, alongside European SXXP stocks,
+ 0.03%,
Although energy names have increased as Brent BRNQ21 crude prices have increased,
-0.52%
hit above $ 75 a barrel earlier. Bitcoin BTCUSD,
-2.98%
remains weak after Monday’s fall which was attributed to a Chinese crackdown.

“At the Fed, we will do all we can to support the economy for as long as it takes to complete the recovery,” the Fed’s Powell said in remarks prepared for Tuesday’s testimony to the subcommittee of the Chamber on the coronavirus crisis. Also late Monday, New York Fed Chairman John Williams said the economy was improving, but not yet enough to curb asset purchases.

Sales of existing homes are also ahead for later.

The European Union said it has opened an antitrust investigation into the advertising technology practices of tech giant GOOGL, Alphabet,
+1.42%
Google.

COVID-19 vaccinations in the world’s poorest countries are at risk of stopping altogether, warned the World Health Organization.

Card of the day

Future problems? Investors borrow to buy stocks, according to this chart of Magnify money (thanks to @SoberLook):

Random readings

Carl Nassib became the first openly gay National Football League player.

When the late night snack hunter in your kitchen is an elephant.

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About Virginia Ahn

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