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Written by the Mackenzie Growth Team
The small and mid cap equity markets in the US had a good August as the prospect of lower interest rates approached. The end of the Fed interest raise cycle may benefit smaller companies but that is not a given as lower interest rates may come as a result of a slowing economy. In our view the markets remained optimistic that the Fed can orchestrate a soft landing.
We shall see as always, but our exposure to less cyclical companies in areas we have spoken about like Healthcare, Technology and Industrials have served us well in volatile periods.
We had the opportunity in August to see some of the management teams at companies who had challenging recent quarters. We attended a medical technology tour on the west coast and among others Dexcom was on the agenda. We heard more about the execution issues they have had and their plans to fix the situation. We believe the problems are salesforce-related, are fixable and not an issue with the underlying products themselves. The recent decision by Medtronic to get out of the glucose monitoring market is an indication of how dominant the two remaining players are. This market is now essentially a duopoly between Dexcom and Abbott.
We also attended a technology conference at which we met with cybersecurity software vendor Tenable. While in their recent quarter growth in their core vulnerability management (VM) space did slow, the company expects this are will grow again in the double-digit range as they introduce more intelligent products like AI Aware, coupled with new regulations for payment security standards that will require more assets to be scanned. We believe Tenable is the leader in VM and will benefit from this return to growth.
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