After more than a decade of large-caps hogging the limelight, an ongoing rotation into small-cap stocks in Canada, the United States and around the world because of falling interest rates is positioning investors for outsized returns.
Canadian inflation hit 2.5 per cent in July, down from 8.1 per cent in June 2022, prompting the Bank of Canada to institute a 0.25 per cent rate cut in June 2024, its first since the beginning of the COVID pandemic in early 2020. This was followed by another equal cut in July, bringing the central bank’s policy interest rate to 4.5 per cent.
Lower borrowing costs make it easier for small-cap issuers to fund operations, while also increasing cash in customer pockets to meet their needs and invest for the future, acting as a tide that raises all boats.
Investors can hitch a ride on this tide by identifying small-cap stocks with high-quality assets and substantiated paths to shareholder value creation. Here are three names to take out for a spin:
Coppernico Metals
Our first small-cap stock to play the rotation is Coppernico Metals, a mineral explorer focused on world-class copper-gold deposits in South America.
The company’s flagship 103,000-hectare Sombrero project in Peru resides on the Andahuaylas-Yauri belt, which it shares with billion-dollar copper-gold porphyry and skarn operations such as MMG’s Las Bambas, First Quantum’s Haquira and Hudbay Minerals’ Constancia, among others.
Sombrero features numerous targets showing copper-gold skarn and evidence for porphyry systems and precious metal epithermal deposits. Highlights include:
- Initial channel samples yielding 30 metres of 1.86 per cent copper and 0.12 grams per ton (g/t) of gold, as well as 54 m of 0.32 per cent copper and 0.04 g/t gold in 2018, and 232 m of 0.47 per cent copper and 0.13 g/t of gold in 2019.
- Historical drilling from 2013 yielding 116 m of 0.42 per cent copper and 0.24 g/t gold, 90.4 m of 0.48 per cent copper and 0.05 g/t gold, and 51 m of 0.43 per cent copper and 0.16 g/t gold.
- Rock samples up to 5.12 g/t gold and 4.29 per cent copper in sulphide mineralization.
Despite boasting a multitude of targets to deliver on ongoing drilling and create positive news flow, and a management team that knows how to make and monetize discoveries, Coppernico Metals stock (TSX:COPR) has given back 11.7 per cent since debuting Aug. 13 on the TSX, irrationally disregarding the exponential divide between Sombrero and its billion-dollar neighbours.
Ivan Bebek, Coppernico’s chairman and chief executive officer, spoke with Stockhouse’s Lyndsay Malchuk about recent drilling at Sombrero. Watch the interview here.
BioVaxys Technology
Our next high-potential small-cap stock to add to the rotation is BioVaxys Technology, a clinical-stage biopharmaceutical company developing immunotherapies for treating cancers, infectious diseases, antigen desensitization and other immunological diseases. These therapies are based on the company’s two flagship innovations:
- Its DPX immune-educating technology platform, which uses a lipid-based system to deliver therapeutic agents shown to enhance immune response and improve health outcomes.
- Its Haptenix neoantigen tumor cell construct platform, where chemicals known as haptens train the immune system to destroy viral or cancerous cells. The platform is the basis for BVX-0918, BioVaxys’ promising phase-I vaccine candidate for stage III-IV ovarian cancer.
Besides the potential to claim a meaningful share in the more than US$150 billion cancer immunotherapy market, BioVaxys recently confirmed positive results supporting DPX’s ability to satisfy unmet needs in patients afflicted with anthrax, influenza and respiratory syncytial virus, causing the stock to skyrocket by more than 40 per cent as the company actively evaluates additional therapeutic domains.
Shareholders have responded enthusiastically to the company’s progress, pushing BioVaxys stock (CSE:BIOV) up by 225 per cent year-over-year, while remaining down by 27.78 per cent since 2019, offering an enticing setup to leverage falling interest rates and profit from continued upward momentum.
James Passin, BioVaxys’ chief executive officer, spoke with Stockhouse’s Coreena Robertson about the company’s new research and production facility with SpayVac for Wildlife in Madison, Wisconsin, to produce veterinary contraceptive vaccines. Watch the interview here.
Else Nutrition
Our final small-cap stock with a good chance of soaring under a falling interest rate environment is Else Nutrition, a developer of plant-based food and nutrition products for infants, toddlers, children and adults with a focus on dairy and soy alternatives.
The company’s product line – which includes drink mixes, cereal and ready-to-drink shakes – has posted a significant increase in North American brick-and-mortar exposure from a few hundred stores to more than 14,000 since Q1 2021. This increase was accompanied by:
- A 17x rise in revenue from C$0.55 million in 2019 to C$9.36 million in 2023.
- Meaningful reductions in packaging and powder production costs, as detailed in Q2 2024 results.
- Active efforts to expand in the United Kingdom, Australia and China.
With a more than US$150 billion addressable market before it, according to the company’s most recent investor presentation, and a growth trajectory that suggests further dominance ahead supported by established presences with heavy hitters such as Walmart, Costco and Whole Foods, among many others, investors in Else Nutrition (TSX:BABY) have every reason to be optimistic about the future. This is especially true given how the market has abandoned the stock, tanking it by more than 85 per cent year-over-year despite numerous value-accretive milestones.
Hamutal Yitzhak, Else Nutrition’s chief executive officer, spoke with Lyndsay Malchuk about the company’s Q2 2024 results. Watch the interview here.
Have a different take on this week’s trio of stock picks or how to best position one’s portfolio to benefit from monetary policy?
Join the discussion: Find out what everybody’s saying about these candidates to capitalize on the rotation into small-cap stocks on the Coppernico Metals Inc., BioVaxys Technology Corp. and Else Nutrition Holdings Inc. Bullboards and check out Stockhouse’s stock forums and message boards.
This is sponsored content issued on behalf of Coppernico Metals Inc., BioVaxys Technology Corp. and Else Nutrition Holdings Inc., please see full disclaimer here.
(Top photo of Tim Kingsley, Coppernico Metals’ vice president of exploration: Coppernico Metals)