Saturday, 24 February 2024

By Murray Dawes Editor, Retirement Trader and Fat Tail Microcaps

[1 min read]

Dear Reader,

It’s been a tale of two markets over the past year with large caps getting all the love while small and microcap stocks copped a beating.

The S&P/ASX Small Ordinaries [ASX:XSO] is finally starting to head in the right direction with the current earnings season seeing plenty of positive surprises.

A recent article in the Australian Financial Review said:

‘We believe we are seeing one of the most favourable environments for the Australian small caps market to outperform into 2024 since the global financial crisis,’ says Maple-Brown Abbott’s Phillip Hudak.

‘A lot of the negative outlook is already priced in for Australian small companies. In addition, there are signs that financial conditions are easing, with inflation moderating and interest rates have peaked.’

Managers from Maple-Brown Abbott to Regal Funds Management and Eley Griffiths also say the balance sheets of many smaller companies are in good shape, with many debt-free and boasting ‘remarkably resilient’ earnings.

Our gold expert Brian Chu has been vocal about the value he is seeing on offer in the gold sector as the Australian dollar gold price continues to hit new all-time highs while gold stocks large and small fail to keep up.

Check out his current presentation where he makes a very strong case that it’s time to be running the ruler over gold stocks after a long period of underperformance.

Future facing metals have imploded over the past six months and reminded us all once again that markets never move in a straight line.

But if the fund managers are right that a peak in interest rates should see some buying return to smaller stocks and you still believe in the long-term bullishness of the energy transition on future facing metals, you should be keeping an eye on former market darlings and getting ready to pounce.

In today’s Closing Bell I show you a European based company listed on the ASX with plans to become a large supplier of anodes to the European EV sector.

They have suffered a sharp sell-off along with everyone else, but there are signs of life from a major buy zone and a large line of stock changed hands yesterday which hints that a large seller may have finished selling.

There is also some buying coming into another graphite stock, Syrah Resources [ASX:SYR], which has jumped 79% over the past couple of weeks.

Perhaps the worst is behind us and it’s time to pick up some bargains.

Regards,

Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps

Murray Dawes is our resident expert trader and portfolio managers. He is a former Sydney Futures Exchange floor trader who went on to design custom trading systems and strategies for ultra-wealthy clients (including one of Australia’s richest families). Today, his mission is to help ordinary Aussie investors make profitable investments, while expertly managing risk.

He uses his proprietary system for his more conversative and longer-term-focused service Retirement Trader…and then applies the same system to the ultra-speculative end of the Australian market in Fat Tail Microcaps (this service is strictly limited and via invitation only).