Management Commentary: January 2025
Dear Investors,
The fourth quarter began quietly for the equity markets, with a post-election boost, bolstering returns in November. This was quickly followed by a Fed meeting in early December where a more hawkish tone, causing interest rates to rise, led to many of these gains being lost. Subsequently, many small cap names weakened and ended the year close to where they began the quarter. Although admittedly we have seen a bit more caution lately, we are expecting sentiment to improve as several market-friendly policies and legislative initiatives are proposed in the coming months. For this reason, even with a less accommodating Fed, we continue to believe investors will likely be more comfortable increasing their risk profiles with a broader, more positive outlook for both economic and earnings potential. This backdrop should create a more conducive environment for a reemergence in small cap stocks, which leads us to believe the aggressive posture we have taken with the Funds versus our benchmarks and peers is warranted.
The Jacob Internet Fund added one new position in the quarter, Freightos. Freightos is a leading online freight digital booking platform. Through acquisitions and organic growth, Freightos has created a valuable portfolio of products to help importers and exporters manage an incredibly complex, fragmented, and still mostly offline logistics economy. Its data and freight index reports are heavily relied upon by the freight forwarding industry to determine prices and negotiate with customers, while its online marketplace has gained some traction as well. We believe the network effects associated with Freightos’ continued platform momentum will ultimately lead to years of sustainably high levels of revenue potential, and solid profitability in the relatively near future, and we believe the company remains well under the radar of most growth investors due to its 2023 introduction on the markets via a special purpose acquisition company, or SPAC.
The Jacob Discovery Fund added two new positions in the quarter, Freightos and Leafly. Leafly is a leading online content and resource for cannabis consumers. The company has retained a reasonably solid customer base of cannabis retailers despite being badly mismanaged since its 2022 market introduction, also via a SPAC. While Leafly’s products or management are not quite as compelling as with our other cannabis content play, Weedmaps, we feel there is room for both companies to succeed in the marketplace as cannabis legislation continues to evolve which should make it easier for US retailers to run their businesses at a profit. Leafly is currently valued as if it might be going out of business, but the company has dramatically pared its costs and reduced bottom-line losses. We believe the company could be close to a refinancing at reasonable terms which we believe will allay investor fears and result in a recovery of its share price.
The Jacob Small Cap Growth Fund did not add any new positions in the quarter.
Ryan Jacob
Portfolio Manager
Jacob Internet Fund
Jacob Small Cap Growth Fund
Darren Chervitz
Portfolio Manager
Jacob Discovery Fund
A special purpose acquisition company (SPAC) is a company formed to raise money through an initial public offering so it can later purchase or merge with an existing company.
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.
Investing involves risk; Principal loss is possible. Please see the prospectus for the risks associated with investing in the Fund.
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, 2024.
Click here to view the holdings for the Jacob Small Cap Growth Fund, as of November 30, 2024.
Click here to view the holdings for the Jacob Discovery Fund, as of November 30, 2024.
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.