Precious metals continue their remarkable ascent, with gold closing in on the unprecedented milestone of US$5,000 per ounce. This surge has propelled shares of Toronto-based asset manager Sprott Inc. (SII:TSX) to impressive gains, positioning it as a standout performer on the S&P/TSX composite index.
Sprott Inc. Delivers Stellar Performance
Sprott Inc., which specializes in precious metals and critical minerals investments, saw its stock rise by a remarkable 122 percent throughout 2025. The momentum has carried into January, with shares closing at $180.84 on Friday. In response to this strong performance, TD Cowen analyst Graham Ryding has significantly increased his price target for Sprott to $176, up from $130.
Ryding also revised his earnings estimates for the company's assets under management (AUM) by 21 percent quarter over quarter and 20 percent year to date. This adjustment reflects what he describes as "precious metals performance and critical minerals year to date and solid flows momentum." Furthermore, the analyst raised his earnings per share estimates for 2026 and 2027 by 42 percent and 45 percent, respectively.
Currently, Sprott's investment portfolio is heavily weighted toward precious metals, with 81 percent of its AUM allocated to this sector. The remaining 19 percent is directed toward critical minerals and uranium investments. According to Bloomberg data, five analysts tracking Sprott maintain an average 12-month price target of $147.00 for the shares.
RBC Updates Canadian Small-Cap Conviction List
In other market developments, RBC Capital Markets has recalibrated its small-cap convictions list for the first quarter of 2026. The updated list features 21 names with an average market capitalization of approximately $2 billion each.
New Additions to RBC's List
RBC analysts have added three companies to their conviction list:
- StorageVault Canada Inc. (SVI:TSX): The RBC team believes "storage fundamentals troughed a few quarters ago and have normalized at a reasonably healthy level."
- Osisko Development Corp. (ODV:TSX): Analysts expressed "strong conviction" based on the prospects for the Cariboo gold project in British Columbia.
- Cascades Inc. (CAS:TSX): RBC anticipates that growing containerboard and tissue demand will support the paper products manufacturer's stock performance.
Companies Removed from the List
Two companies were deleted from RBC's small-cap conviction list:
- Killam Apartment REIT (KMP.UT:TSX)
- MDA Space Ltd. (MDA:TSX)
Companies maintained on the list include Cineplex Inc. (CGX:TSX), DRI Healthcare Trust (DHT.UT:TSX), Jamieson Wellness Inc. (JWEL:TSX), and Torex Gold Resources Inc. (TXG:TSX).
In the final quarter of last year, RBC's small-cap list experienced a slight decline of 0.9 percent, while the TSX composite's small-cap index gained 10.2 percent. Resource-based names significantly outpaced non-resource companies, with returns of 15 percent versus 7.8 percent, respectively.
Since the list's inception in 2013, RBC reports that it has achieved total returns of 580 percent as of the end of last year. This performance compares favorably to the TSX composite's small-cap index gain of 224 percent and the main index's return of 286 percent. RBC updated its list on January 7.
Purpose Investments Analyzes U.S. Small Caps
Craig Basinger, chief market strategist at Purpose Investments Inc., provided insights into the U.S. small-cap space in a note published on January 19. Basinger noted that the S&P 600 Small Cap index has gained 7.3 percent through mid-January, outperforming the S&P 500 index's 5.1 percent increase.
"On balance, we're a bit more constructive on smaller caps relative to past years," Basinger stated, while outlining both advantages and challenges for the sector.
Advantages for U.S. Small Caps
Basinger highlighted several positive factors for small-cap companies:
- Valuation Advantage: Small caps trade at a "more reasonable" 15.3 times earnings compared to 22 times for the S&P 500.
- Improved Earnings Growth Forecasts: Fundamentals appear encouraging, though Basinger noted that earnings revisions remain "a bit troubling."
- Favorable Interest Rate Environment: Falling interest rates typically benefit smaller companies.
- Mergers and Acquisitions Activity: M&A activity began to reaccelerate in 2025, creating opportunities for small-cap companies.
Challenges Facing U.S. Small Caps
Basinger also identified several headwinds for the small-cap sector:
- Economic Positioning: Small-cap companies aren't in a "sweet spot for the U.S. economy" due to their higher exposure to consumers facing financial pressure.
- Tariff Impacts: Potential tariffs could negatively affect small companies' financial performance.
- Declining Business Optimism: Small business optimism has slumped in the U.S., a measure that tends to correlate with small-cap performance.
The S&P 600 Small Cap consensus earnings have declined by two percent for 2026, reflecting some of these challenges. Despite this, Basinger maintains a cautiously optimistic outlook for the sector, particularly given the valuation advantages and improving fundamentals.
