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Written by the Mackenzie Growth Team
The small and mid cap equity markets in the US had a very good July as there was renewed enthusiasm stemming from the idea that lower interest rates would benefit the companies. That may or may not be true, as lower interest rates may come as a result of a slowing economy, which markets became more concerned about in early August as some employment statistics were weak.
We shall see as always, but our exposure to less cyclical companies in areas we have spoken about like Healthcare, Technology and Industrials have over all served us well in the volatility of the late summer. During the most recent earnings season, companies that had near-term disappointments, like our holdings in Dexcom and Charles River, were harshly treated.
At Dexcom, which we have owned for much of the last decade, there were some execution mistakes. The management team did not shrink from the issues, and we believe they will act to resolve them. At companies like Charles River, the question is when drug companies will begin to spend again on research since so far this has not been happening. In our view it is a matter of time – you cannot starve the drug pipeline forever since that is ultimately the life blood of the industry. We remain invested in several drug supply chain companies, including Charles River and also Bio-Techne, Maravai Lifesciences and Waters.
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