Why I Bought This Small-Cap Healthcare Name During Market Dip
I am continuing to incrementally buy dips in the market as the economy is poised to remain uncertain.
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After a decent rally on Monday, equities went back into "risk-off" mode during trading on Tuesday.
The NASDAQ led the selloff with a loss of just over 1.7%. The S&P 500 fell just over 1%, and the Dow ended up losing 260 points on the day. The small-cap Russell 2000 gave up most of its gains from the previous trading session, dropping nearly .9%.
These down days are becoming quite common over the past several weeks. The new administration has ushered in at least a temporary wave of uncertainty around tariffs, trade goals and foreign policies. The DOGE group is intent to cut several federal government agencies and programs significantly. The latter is an effort that I applaud and personally believe is long overdue. That said, this just adds to the uncertainty investors are feeling as the ground shifts beneath their feet.
It is also something we all should try to get comfortable with for the timebeing. The market began the year in overbought territory and was overdue for a pullback after two years of the S&P 500 delivering 20% plus returns — something that hadn’t happened in this century. The Atlanta Fed’s GDPNow is still pointing to an economic contraction (negative 1.8%) in the first quarter in its latest projection made earlier this week.
The larger question is whether the first quarter will be a "blip" or whether the economy will experience a recession in 2025. My view is muddled in that regard, and I can see either scenario playing out in the quarters ahead. This is why I continue to deploy money into the market in an incremental way, utilizing covered-call orders on down days like Tuesday. That will be my game plan until the economic picture becomes clearer and more certain. Something I think is unlikely in the weeks ahead.
On Tuesday, I added some shares to Harrow, Inc. HROW, a small-cap healthcare name I recently highlighted. Before the bell on Tuesday, management provided preliminary Q4 results that beat expectations. Leadership also guided that it sees at least 40% revenue growth ahead of the company in FY2025. Another positive is the company should see little to no impacts from changes in tariff policies.
I also opened a new "starter" position in Northern Oil and Gas, Inc. NOG. The stock of this energy concern is down some 20% in 2025, thanks to the fall in energy prices this year. Northern Oil and Gas is focused on acquiring minority working interests in unconventional oil and natural gas properties primarily in the Williston, Permian, Appalachian and Uinta Basins. As a non-operator Northern can keep its employee count and costs low.
With the recent decline in the stock, NOG is now in value territory at roughly seven-times forward earnings. The stock also pays a just over 6% dividend yield, has seen some recent insider buying and the company recently announced a stock buyback program as well.
These are the kinds of moves I anticipate I will continue to make in the months ahead as significant uncertainty is likely to persist around the markets and the economy over the near term.
At the time of publication, Jensen was long HROW and NOG.
