Commentary and Research Papers
2025
2025
The post-election investor excitement for the prospect of pro-growth, pro-business policies from the new Trump Administration ebbed in February, in light of growing uncertainties related to the President’s threat of tariffs, worries over stubborn inflation and a possible slowdown in economic activity.
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2025
2025
On a relative basis, the SCV portfolio rebounded nicely in February after declining on the DeepSeek news in late January. We’ve spoken in the past about how the SCV portfolio tends to underperform in lower quality or momentum driven markets due to its value bias but typically performs well in down markets.
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2025
2025
The Small Capitalization Value Portfolio (SCV) was doing well through the first 24 days of the month until the DeepSeek news rattled the markets on 1/25/2025. We have exposure to the AI/energy space through our longstanding holdings in BWX Technologies, Argan, Vicor, and, more recently, through our November purchase of Solaris Energy Infrastructure. These stocks performed well over the past few months and had grown into larger positions in the portfolio.
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2025
2025
Stocks were volatile in January, responding to numerous market-moving developments but ultimately closing in positive territory. After a weak December, stocks initially rose in the first week of January on optimism about President-elect Trump’s pro-business policies. They then fell mid-month after stronger than expected economic data, as well as the potentially inflationary impact of President Trump’s policies, led some to wonder whether the Fed’s anticipated two rate cuts would come to fruition in 2025. The bond market also sold off, with the 10-year US Treasury yield reaching 4.79%, its highest yield since October 2023. But a subsequently favorable Consumer Price Index inflation reading, which showed a decelerating trend, surprised the market, leading to a rebound in bond prices and a strong rally in US equites. By January 24th, the S&P 500 index had risen to 2025’s first all-time high.
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2025
2025
Small capitalization value stocks could be well positioned for outperformance in the coming years. We believe active management can be a prudent and effective approach to these companies. We believe an active, long-term investment approach, focusing on sector diversification, intrinsic value (earnings and cash flow), and qualitative metrics (such as high-quality management teams) is the most effective way to exploit the opportunities that the small capitalization indices and passive ETFs may not capture. We employ this philosophy and approach in the Pinnacle Small Capitalization Value Portfolio (SCV).
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2025
2025
After a strong November, the small capitalization indices gave back their quarterly gains in December. The Pinnacle SCV Portfolio thrived during the month, on a relative basis. Our positions held up well and were bolstered by a slightly higher-than-normal cash balance and a company buyout (Cross Country Healthcare). We strive to keep the portfolio fully invested, typically maintaining a modest cash balance of around 2% to 4%. However, there are times when the market rises quickly, and we cannot find attractive opportunities for short periods. That happened in late November and early December. This situation generally balances out over time, and the pullback that began in December pullback is giving us some better opportunities.
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Founded in 1984, Pinnacle Associates, Ltd. is a forward thinking, multi-billion dollar investment advisory firm focused on transparency and putting clients first. We provide advice to individuals and families, institutional investors and other financial institutions.
