Interest rates rocketed higher this past year, having an outsized impact on industries that have a large number of small cap stocks. Small caps are often either not profitable yet, or even if they are, have large capital requirements and borrowing needs. And as rates rose, those borrowing needs became a lodestone around the neck of small companies.
One sector that felt this acutely was the medical devices sector. Like pharmaceuticals and biotech, medical devices is made up of some large companies, but also has a very big cohort of small companies doing cutting edge research and development. But, as the interest rate cycle seems to be peaking, it’s time to revisit this sector and one of its beaten down small cap members, Surmodics (SRDX).
