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The Vickers Top Insider Picks is a daily report that utilizes a proprietary algorithm to identify 25 companies with compelling insider purchase histories based on transactions over the past three months.

The Vickers Top Insider Picks is a daily report that utilizes a proprietary algorithm to identify 25 companies with compelling insider purchase histories based on transactions over the past three months.

Despite bursts of outperformance, small- and mid-cap stocks (SMID) have underperformed large-caps year to date -- as they have over the past five years. But they may be in a better position to generate market-beating returns going forward. For one thing, SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by the trade and tariff debate, or fallout from unrest in the Middle East, the Russian invasion of Ukraine, issues in China, or other geopolitical developments. As well, the prices of SMID stocks generally are lower than the prices of large-caps. Finally, there are long stretches in the record books when SMID stocks have outperformed large-caps. SMID stocks can be risky, but despite those risks, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 20% of the U.S. stock market's capitalization is comprised of SMID stocks.

During the pullback, sentiment went from very bullish to very bearish very quickly. Surprisingly, the S&P 500 (SPX) fell only 10%. Still, we believe certain factors led to this quick change in investor opinions. The decline was rapid and started at all-time highs. Rapid declines generally elicit a quick elevation in fear. In addition, the stocks that were hit the hardest were all strong performers, and investors often load up on the high-momentum names. The stock market was in one of those perfect scenarios late last year and early this year, and sentiment was quite bullish. But one must be careful when everything seems perfect. Earnings growth was strong, the economy was growing, inflation had calmed, and we had a new administration that was pro-growth. But tariff talk quickly put an end to the bullish hysteria, this as investors worried about higher prices, slower growth, and even a recession. Many on Wall Street immediately cut bullish targets, and the investment mood took a 360-degree turn. What really concerned investors was the fact that there was (and still is) great uncertainty about what tariffs will go into effect, what the broader implications will be, and if there will be retaliatory tariff actions against the U.S. The AAII survey flipped to levels seen during the 2022 bear market, with bears hitting 61% and bulls dropping to 19%. Strangely, the NAAIM Exposure Index did not react quickly to the decline and has fallen only to 58% exposure. During the 2023 pullback, exposure hit 25%. During 2022, it fell to 13%. (Mark Arbeter, CMT)