The Acquirers Podcast Eric Cinnamond on small cap value, inflation, tariffs, deficits, Mag 7, and AI cap ex | S07 E27
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Aug 20, 2025 Eric Cinnamond, a small cap value specialist at Palm Valley Capital Management, shares insights on navigating the current financial landscape. He discusses the underperformance of small-cap stocks against mega-caps and the impact of inflation on profit margins. Cinnamond highlights the importance of strong balance sheets in energy and transportation investments and draws parallels between today's AI hype and the dot-com bubble. He emphasizes evaluating tangible assets and adapting investing strategies amidst inflation and shifting consumer behavior.
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Small Caps’ Multi-Year Underperformance
- Small caps have barely grown over the last four years while large caps have surged, creating huge relative dispersion.
- Flows and concentrated earnings/buybacks in mega caps drove that divergence, not superior fundamentals in small caps.
Buy Cyclicals Already In Recession
- Buy cyclicals already in recession because prices fall before fundamentals recover and valuations get attractive.
- Focus on companies with declining earnings today that can stabilize and compound later when cycles turn.
Buybacks Power Asset Inflation
- Corporate buybacks are a massive driver of asset inflation and can dwarf passive flows.
- Buybacks concentrated in large caps helped inflate their prices independent of underlying earnings growth.
