Zacks Investment Ideas feature highlights: RUMIC, Innodata, HF Foods, CSP, Frequency Electronics and Gencor Industries

Zacks05-30

For Immediate Release Chicago, IL – May 30, 2024 – Today, Zacks Investment Ideas feature highlights Russell Microcap Index (RUMIC), Innodata Inc. INOD, HF Foods Group Inc. HFFG, CSP Inc. CSPI, ...

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CSPI, ...</p>\n\n<a href=\"https://finance.yahoo.com/news/zacks-investment-ideas-feature-highlights-122800009.html\">Source Link</a>\n\n</div>\n","source":"yahoofinance","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Zacks Investment Ideas feature highlights: RUMIC, Innodata, HF Foods, CSP, Frequency Electronics and Gencor Industries</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nZacks Investment Ideas feature highlights: RUMIC, Innodata, HF Foods, CSP, Frequency Electronics and Gencor Industries\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-30 20:28 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/zacks-investment-ideas-feature-highlights-122800009.html><strong>Zacks</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>For Immediate Release \nChicago, IL – May 30, 2024 – Today, Zacks Investment Ideas feature highlights Russell Microcap Index (RUMIC), Innodata Inc. INOD, HF Foods Group Inc. HFFG, CSP Inc. CSPI, ...</p>\n\n<a href=\"https://finance.yahoo.com/news/zacks-investment-ideas-feature-highlights-122800009.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"HFFG","symbol_name":"HF Foods Group Inc","start_time":0,"source_url":"https://finance.yahoo.com/news/zacks-investment-ideas-feature-highlights-122800009.html","article_id":"2439647623","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/PGdNp8XrDd2gpZmwXvfYeQ--~B/aD00MDA7dz02MzU7YXBwaWQ9eXRhY2h5b24-/https://media.zenfs.com/en/zacks.com/031593faad26a4324eea3430cd98f3f4"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2439647623","pubTimestamp":1717072080,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"Chicago, IL – May 30, 2024 – Today, Zacks Investment Ideas feature highlights Russell Microcap Index , Innodata Inc. INOD, HF Foods Group Inc. HFFG, CSP Inc. CSPI, Frequency Electronics, Inc FEIM and Gencor Industries, Inc. GENC.Historically, investor perception has been that smaller companies are more burdened by rising interest rates. Small companies typically have floating rate debt that is more sensitive to interest rate fluctuations. Conversely, large companies normally have better lending terms because of their financial size, more proven operating history, and asset quality which affords comforting downside protection to lenders.But during the slower paced raising period of 2016-2019 microcaps continued to rise, showing resilience to the rising rates, albeit from a very low base. So even though rates went from near zero to 2%, risk-free alternatives were still not very compelling and the risk-on trade prevailed.The graph above charts the Russell 2000 performance against the Fede","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"HFFG":"HF Foods Group Inc","INOD":"Innodata Inc","GENC":"范科工业","HF":"绝对收益主动型ETF-DGA","CSPI":"CSP Inc","BK4157":"电子设备和仪器","FEIM":"高频电子","BK4123":"调查和咨询服务","BK4102":"食品分销商","BK4106":"数据处理与外包服务","BK4161":"工业机械","BK4134":"信息科技咨询与其它服务"},"translate_title":"Zacks投资理念特色亮点：RUMIC、Innodata、HF Foods、CSP、Frequency Electronics和Gencor Industries","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"FEIM":1,"GENC":1,"HF":1,"HFFG":1,"INOD":1,"US7Y.BOND":0.9,"US6M.BOND":0.9,"US5Y.BOND":0.9,"US3Y.BOND":0.9,"US30Y.BOND":0.9,"US2Y.BOND":0.9,"US12M.BOND":0.9,"US10Y.BOND":0.9,"CSPI":0.9,"US912797GB79.BOND":0.6,"US912797GK78.BOND":0.6,"US912797GL51.BOND":0.6,"US912797GW17.BOND":0.6,"US912797HE00.BOND":0.6,"US912797FS14.BOND":0.6},"content_text":"For Immediate Release \nChicago, IL – May 30, 2024 – Today, Zacks Investment Ideas feature highlights Russell Microcap Index (RUMIC), Innodata Inc. INOD, HF Foods Group Inc. HFFG, CSP Inc. CSPI, Frequency Electronics, Inc FEIM and Gencor Industries, Inc. GENC.\nAre Microcaps Setting Up to Outperform?\na rather stark divergence in performance between the S&P 500 and the Russell Microcap Index ETF over the last 18 months. The S&P 500 is currently trading at a trailing twelve-month PE of approximately 25x vs. 13.3x (excludes negative EPS companies) for the Russell Microcap index. The Magnificent 7 and other growthier tech names have no doubt contributed to the S&P performance. But has an elevated interest rate environment held back microcaps?\nHistorically, investor perception has been that smaller companies are more burdened by rising interest rates. Small companies typically have floating rate debt that is more sensitive to interest rate fluctuations. Conversely, large companies normally have better lending terms because of their financial size, more proven operating history, and asset quality which affords comforting downside protection to lenders.\nThe graph above charts the Federal Feds rate against the performance of the Russell Microcap Index, which was launched in 2005. Keep in mind that this dataset is somewhat limited in that it only covers about 20 years with only two major economic events, the GFC (Great Financial Crisis) and the Covid pandemic.\nClearly, microcaps performed very well during the near zero rate period. But equities were the only game in town as yield was scarce everywhere else, so the risk-on trade was especially strong.\nBut during the slower paced raising period of 2016-2019 microcaps continued to rise, showing resilience to the rising rates, albeit from a very low base. So even though rates went from near zero to 2%, risk-free alternatives were still not very compelling and the risk-on trade prevailed.\nMicrocaps briefly retreated significantly due to Covid but then rebounded as interest rates again retreated near zero during the post-Covid recovery. But the \"accelerated\" climb in rates from 0 to 5% did not go well for microcaps. A 5% risk-free return is very compelling, especially to investors who haven't seen that level of rates in 17 years and especially relative to the inherent volatility of microcaps.\nWe can elongate the data back to 1984 by using the Russell 2000 index as a proxy for small companies. This index has \"bigger\" small companies than the Russell Microcap index and was launched in 1984. As of 4/30/24 the average market cap in the index was $4.3B with a median market cap of $879 m vs. $859 m and $213 m, respectively, for the Russell Microcap. This index is frequently used as a benchmark for small-cap performance.\nThe graph above charts the Russell 2000 performance against the Federal Funds Rate. Going back to 1984 yields additional data points to consider including a few additional recessions as well as more tightening and loosening periods. Interestingly, small caps showed less positive reaction to the lowering of rates from 10% to 3% to thwart the 1990 recession vs. the lowering of rates from near 7% to 1% to counter the 2000/2001 recession.\nSo \"when\" the Fed begins cutting rates, could Microcaps potentially recover and shine again? Will the risk-on trade for Microcaps return? There is some recent evidence that suggests that the market thinks so.\nFor instance, on November 14th when a positive inflation print posted, and thus implicitly the prospect of rate loosening, the Russell Microcap index rose 5.4%. Additionally, when Fed commentary on December 13th suggested three possible rate cuts in 2024, the Russell Microcap index responded with gains of 3.8% on 12/13 and 2.3% on 12/14. This is also reflective of the larger and ongoing discussion about the forces driving stock market performance-macro economy vs. interest rates.\nSuch positive and arguably hyper-sensitive responses have led some to believe that micro caps are a \"tightly coiled spring,\" ready to unleash if a steady path of lowering rates begin. We believe this could occur but rate declines would need to be consistent and prolonged in order to materially bring down the risk-free alternative rate.\nThe market is currently pricing in about a 2.4% Fed Funds rate by the end of 2026 which we believe could be sufficient to move the needle of asset class momentum assuming it comes to fruition. But inflation is proving sticker than expected and this potential cadence of interest rate declines may not materialize as envisioned. In fact, the Fed Funds Futures have a poor track record of predicting the timing of rate changes. Regardless, it is a real time market barometer of what the market is thinking, a \"put your money where your mouth is\" litmus test.\nAs mentioned previously, microcaps tend to have floating rate debt so declines in interest rates would pretty quickly result in declines in interest rate expenses and could materially improve Earnings Per Share for debt laden companies. These interest rate declines would also probably need to be accompanied by a stable economy in order for microcaps outperformance to accrue. As the graphs above demonstrated, microcaps responded violently downward to economic crises.\nPerhaps most importantly, the Fed Funds rate dictates the cost of capital, and consequently, the discount rate for calculating the present value of future cash flows. Due to the power of math and compounding over future periods, declines in rates will have an outsized impact on current DCF (discounted cash flow) valuations. So, declines in interest rates could make microcaps especially more compelling on a valuation front before the market prices catch up, and thus represent a buying opportunity.\nIndependent of the impact of interest rates, investors need to be aware of the unique properties of microcaps. For instance, microcap companies tend to have less international exposure as the majority of their sales and costs are US based. Thus, they tend to be more insulated from geopolitical risks including tariff issues and US dollar strength/weakness.\nMicrocaps also benefited disproportionately from corporate tax reform (35% to 21%) as larger companies tend to operate in foreign tax jurisdictions with comparatively lower tax rates which reduces their overall tax rate. So, any future legislation related to trade or tax policy is especially relevant for microcaps especially relative to large caps.\nMicrocap stocks, with their domestic focus, could also benefit from the onshoring phenomenon of bringing manufacturing back to the US as well as large-scale US fiscal spending on infrastructure.\nIn conclusion, microcaps presently look undervalued at these levels, especially relative to their large cap brethren. There are also several positive conditions which could uniquely benefit the financial performance of microcaps. And the market perception of their sensitivity to interest rates appears alive and well.\nBut we still maintain a stable economy is required to work in concert with possible rate reductions to enable possible microcap outperformance. And the timing and cadence of such possible rate reductions remains uncertain, driven by the forces of inflation and the strength of the overall economy.\nAs an investment strategy one could buy the Russell Microcap ETF for microcap exposure but investors should be aware that as of 4/30/24 the index skewed 25.5% towards healthcare (including biotech) and 19.1% financials. Volatility in these two sectors can materially impact the performance of the index. Additionally, investors should be aware that there are many unprofitable companies in the index as well.\nOr, one could buy a basket of microcap stocks rated Outperform by the Zacks Microcap team. The Zacks rating system utilizes both quantitative and qualitative methods to \"control for junk.\" It acts as a filter to remove the impurities inherent in the index.\nAcademic research has shown that \"controlling for junk\" is necessary to validate the \"size effect\" inherent in microcaps which has led to long term outperformance, but with significant volatility. See our previous discussion about the \"size effect\" here.\nThe Zacks screening process factors in macro-economic sensitivity and interest rate sensitivity at the individual company level. Some current Outperform recommendations by Zacks include INOD, HFFG, CSPI, FEIM, and GENC.\nInnodata Inc. is a \"picks and shovels\" play on AI. Innodata provides data testing services for companies developing AI products. They have landed contracts with several of the major tech players and stand poised to benefit from elevated investment spending in AI.\nHF Foods Group Inc. is a distributor to the highly fragmented and consistently growing Asian restaurant industry in the US. The industry lacks the purchasing power of large chain restaurants and thus relies heavily upon distribution. HF Foods Groups focuses on especially time-sensitive food staples like seafood and produce.\nCSP Inc. is a reseller of computer hardware and software across multiple industry verticals. But CSP's higher margin cybersecurity software product ARIA has been gaining traction and addresses the growing incidence of cyber attacks against critical infrastructure (e.g. utilities) in the US.\nFrequency Electronics, Inc. is a designer and manufacturer of precision time and frequency control components for both land-based communication systems and satellites. Frequency Electronics should benefit from elevated global defense spending.\nGencor Industries, Inc. designs and manufactures heavy machinery used in the production of highway construction materials like asphalt and environmental control equipment. Gencor Industries should continue to benefit from US infrastructure spending.\nWhy Haven't You Looked at Zacks' Top Stocks? \nSince 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.\nToday you can access their live picks without cost or obligation.\nSee Stocks Free >>\nMedia Contact\nZacks Investment Research\n800-767-3771 ext. 9339\nsupport@zacks.com\nhttps://www.zacks.com\nPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.\nWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report\nGencor Industries Inc. (GENC): Free Stock Analysis Report\nInnodata Inc. (INOD) : Free Stock Analysis Report\nFrequency Electronics, Inc. (FEIM): Free Stock Analysis Report\nCSP Inc. (CSPI): Free Stock Analysis Report\nHF FOODS GROUP INC. (HFFG): Free Stock Analysis Report\nTo read this article on Zacks.com click here.\nZacks Investment Research","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2439647623"}