These 3 Risky Small-Cap Stocks Appear to Be Paying Off
As the Russell shows signs of life of late, these three healthcare bets are finally on the move.
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Small caps have increasingly started to show some signs of life of late. Last week, the small cap Russell 2000 rose over 3% and easily outdistanced the major larger-cap indexes. It has done the same over the past month as well as now. Whether this is an inflection point after many, many years of underperformance or just a bit of catch up is hard to determine at the moment. But it has been nice to see some of the small-cap laggards in my portfolio move up nicely in recent weeks. In today’s column, I will discuss several of these holdings in the biotech and healthcare spaces, that are also seeing positive news flow of late.
I briefly covered Vir Biotechnology, Inc. VIR in June, but I will add some recent highlights. Earlier this month, management provided an encouraging business and pipeline update. Then earlier this week, BofA Securities upgraded VIR to a "Buy" and bumped up its price target two bucks a share to $14. The analyst at BofA stated the market was underestimating the potential of Vir’s phase 3 combo treatment for severe liver disease caused hepatitis delta virus. I concur and feel the stock will continue to rebound.
Humacyte, Inc. HUMA, another major laggard in my portfolio, has followed a similar trajectory to Vir Biotechnology here in August. On the 11th of this month, leadership provided a positive update on the commercial expansion plans for its recently approved vascular conduit Symvess. This should drive a notable uptick in its sales trajectory in the coming quarters. Then this week, the stock was upgraded to an Overweight at Barclays, which sees a huge potential market for this product.
Long time underperformer Atai Life Sciences N.V. ATAI has finally started to reward my extreme patience in this clinical stage biotech concern as the equity has tripled off its recent lows in mid-May. The company disclosed positive mid-stage trial data from its psychedelic candidate to treat depression in early July. The whole psychedelic space was also boosted when Abbvie ABBV bought privately held psychedelic drug developer Gilgamesh Pharmaceuticals in a deal worth approximately $1 billion at the end of July. That is Atai’s approximate current market cap, and the company has recently engaged an investment bank to assess early-stage interest from potential acquirers.
I end with AbCellera Biologics Inc. ABCL, another struggling biotech concern that has proved vexing to own over the past 18 months. The stock, however, has moved sharply higher in recent months. AbCellera is using its AI-driven technology platform to discover new antibody candidates both for internal development and by partnering most of these numerous assets with much larger drug concerns. In early August, leadership provided a pipeline update that demonstrated some progress and the company’s balance sheet is cash rich for the moment.
It is nice to see some significant upward movement around some of the riskier bets in my portfolio. Now, can these laggards build on their recent positive momentum and close out 2025 on a high note?
At the time of publication, Jensen was long HUMA, ABCL, ATAI, VIR.
