Management Commentary: January 2024
Dear Investors,
This last quarter began where the third quarter left off, with many investors still concerned about a weakening economy and a constrictive interest rate environment. Valuations continued to fall well into October until the most recent Federal Open Market Committee (FOMC) meeting finally delivered what investors wanted to hear: A more dovish posture, with no more rate hikes foreseen and the implicit expectation of significant rate cuts over the next 12 months. This pivot surprised most market participants, who had been conditioned to expect the Fed to be well behind the curve during economic transitions. Caught off guard, investors quickly readjusted to a higher likelihood of lower rates next year and the possibility of a soft landing for the economy. As we outlined in our last update (and have seen play out in the last couple of months), if the Fed takes a more accommodative stance on interest rates and the economy manages to avert a recession, we believe the right conditions are in place for the smaller cap companies we favor to significantly outperform. As such, we have mostly maintained our current posture in the Funds to continue to maximize our exposure to these trends.
The Funds added no new positions in the quarter. From all of us at Jacob Funds, we hope everyone has a happy and healthy 2024!
Ryan Jacob
Portfolio Manager
Jacob Internet Fund
Jacob Small Cap Growth Fund
Jacob Forward ETF
Darren Chervitz
Portfolio Manager
Jacob Discovery Fund
Jacob Internet Fund, Small Cap Growth Fund and Discovery Fund Risk Disclosures:
Mutual fund investing involves risk. Principal loss is possible. There are specific risks inherent in investing in the Internet area, particularly with respect to smaller capitalized companies and the high volatility of internet stocks. All three funds may invest in foreign securities, which involve greater volatility and political, economic and currency risks, and differences in accounting methods. These risks are greater in emerging markets. All three funds also invest in smaller companies, which involve additional risks, such as limited liquidity and greater volatility.
The Internet Fund may invest in fixed income and convertible securities. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. The market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. In addition, convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality.
Investments in micro capitalization companies may involve greater risks, as these companies tend to have limited product lines, markets and financial or managerial resources. Micro cap stocks often also have a more limited trading market, such that the Adviser may not be able to sell stocks at an optimal time or price. In addition, less frequently-traded securities may be subject to more abrupt price movements than securities of larger capitalized companies.
Jacob Forward ETF Risk Disclosure:
Investing involves risk; Principal loss is possible. Please see the prospectus for the risks associated with investing in the Fund.
Click here for a link to the Jacob Forward ETF prospectus.
Click here to view the Jacob Funds prospectus.
The information provided herein represents the opinion of Jacob Mutual Funds and is not intended to be a forecast of future events, a guarantee of future results, nor investment advice.
Click here to view the holdings for the Jacob Internet Fund, as of November 30, 2023.
Click here to view the holdings for the Jacob Small Cap Growth Fund, as of November 30, 2023.
Click here to view the holdings for the Jacob Discovery Fund, as of November 30, 2023.
Click here to view the current holdings for the Jacob Forward ETF.
Please note that these fund holdings are subject to change and should not be considered a recommendation to buy or sell any security.
Earnings growth is not representative of the Fund’s future performance.
The Jacob Funds are distributed by Quasar Distributors, LLC.