Penn Capital Management Company, LLC

Here at Penn Capital Management Company, LLC we wanted to provide our insights on the current market environment. While we can’t predict the depth and duration of the current equity market volatility, we believe the current situation seems like a sharp overreaction and feel the long-term risk-reward remains compelling. Eric Green, CFA and Joe Maguire share a few quick thoughts.   We believe corporate credit fundamentals are robust. Broadly speaking, we think our portfolio companies have ample liquidity and have capitalized on the active new issue market to extend maturities and reduce credit risk. Overall leverage is low, and interest coverage is high. While credit spreads have moved higher, benchmark interest rates have moved lower, keeping the overall cost of capital relatively unchanged.     While consumer spending has slowed somewhat and we are seeing bifurcation between upper income and lower income cohorts, we believe the consumer remains healthy overall supported by low unemployment, rising wages, positive wealth effect, and easing inflation. Fed rates cuts seem likely to stimulate demand for housing, autos, and durable goods and boost consumer confidence.     Prior to this correction, small cap equities were already cheap on an absolute basis and historically cheap relative to large caps.  As we see it, small caps are under-exposed to some of the frothiest and most extended areas of the market (Magnificent 7, Bitcoin, AI).  We think inexpensive valuations, stable fundamentals, and lower interest rates have been driving an uptick in acquisitions of small cap companies.     Lastly, tactically, while technical damage has been done there are signs of capitulation with the VIX spiking to levels not seen since the onset of COVID and the Global Financial Crisis and market breadth deteriorating to oversold levels. Risk Disclosure: The views expressed are those of Penn Capital Management Company, LLC, a boutique manager majority owned by Seaport Global Asset Management as of current date only and are not intended as investment advice or recommendation. For informational purposes only. Investments are subject to market risk, including the loss of principal. Past performance does not guarantee future results. There can be no assurances that any of the trends described will continue or will not reverse. Past events and trends do not imply, predict or guarantee, and are not necessarily indicative of future events or results. Investors cannot invest directly in an index.

All of us at Penn Capital Management are very excited to share the news of Seaport Global Holdings LLC, (SGAM) Advisors becoming the majority owner of Penn Capital. SGAM Advisors' investment in Penn Capital will fortify our growth plans and bolster the ongoing expansion of our sales and marketing efforts. To learn more check out our website!

Thank you Fox Business Network and Maria Bartiromo for having Penn Capital, CIO, Eric Green, CFA on last week to speak on the increased interest in Small Caps. Check it out below to see Eric Green, CFA! https://lnkd.in/eU5kAjdC

Thank you Barron's and Paul La Monica for speaking with our CIO, Eric Green, CFA this week to get his insights on the stock market. Check it out below!

CIO Eric Green, CFA shared his thoughts with Yahoo Finance this week stating he believes "This will be the first year in the last three where small cap stocks [have] better earnings growth than large cap stocks."    Highlighting the critical role of Fed rate cuts, Eric believes these factors have the potential to significantly bolster small caps. Watch here for his expectations that he shared with Julie Hyman and Josh Lipton:  https://lnkd.in/e598ZcN9 #SmallCaps #RateCuts #federalreserve

While the December CPI report came in hot, CIO Eric Green, CFA remains optimistic about inflation falling. He shared with Pensions & Investments that he believes there may be a "longer pause from the Fed and the Fed cutting rates later in the year." He believes the downward inflation trajectory will continue approaching the Fed's 2% target, warranting patience in further policy action amid recent hawkishness. Read more:: https://lnkd.in/eD9_9Xq5 #Inflation #Fed #RateCuts #Economy

CIO Eric Green, CFA shared valuable insights with Krystal Hur of CNN Business on the Federal Reserve's rate movements and market implications. Eric says recent key reports suggest that [the Personal Consumption Expenditures Index] will also show signs of moderating prices. Read more:  https://lnkd.in/gEHprv4E #Inflation #InterestRates #FederalReserve

CIO Eric Green, CFA shared insights with Kiplinger following the latest CPI report. He told Dan Burrows, "Overall, this does not change our belief that inflation is slowing toward levels acceptable by the Fed. We believe there will be a lengthy pause from the Fed and rate cuts that will begin later in the year." Read more here:  https://lnkd.in/gZj9Qxjp #CPI #FederalReserve #Inflation #InterestRates

CIO Eric Green, CFA recently appeared on Yahoo Finance to discuss the surge in small cap stocks. He told Julie Hyman and Josh Lipton that he believes that "This is the start of the fourth-quarter rally for small cap stocks." Watch here for more insights: https://lnkd.in/eGDMZZZP #SmallCaps #Investing #MarketTrends