Trader’s Café With Zak Mir: The Week In Small Caps, Saturday 14th January 2023

Nearing All-Time Highs

Author @ZaksTradersCafe

So the FTSE 100 is within spitting distance of its all-time highs, with around another 50 points to go. Who would have thought it? Well, practically no one except yours truly. Of course, I cannot get too smug, the indicators I used were on the chart of the FTSE 100, with last month’s golden cross and the break of 7,630. But we had failed to break that zone many, many times over the past two decades. No, the clincher was the doom and gloom in the financial media and the way that they and even City types have been on a “whingefest” for much of the past year.

Prince Harry

True, there have been rather more things to whinge about than Prince Harry, but few have deconstructed where we really are. “Bearish” factors going into 2023 have been in no particular order, the war in Ukraine, inflation, mortgage rates, strikes, and perhaps the lack of firm Government leadership. However, given that the stock market is basically at all-time highs, how bearish are these bearish factors? Obviously, not very. One could run through why each one does not really matter to shares. But perhaps the old classic of bull markets climbing a wall of worry is the one to focus on.

The Small Cap Index

As this is the Week in Small Caps, rather than Blue Chips, it may be right to look at the FTSE Small Cap index, if only to see whether there is any light at the end of the tunnel in terms of the bear run in this part of the market. If anything, there would be the hope that a rally up from current levels near 6,500 to the top of last year’s triangle at 7,300. Hopefully, while above March 2022 support at 6,200, this may be the case over Q1 2023.

Investor Events

Even though the worst of the totally damaging lockdowns of the pandemic is so far well behind us, there is still an extra frisson of enjoyment getting out and about to investor events. The highlight is meeting good people, who are actually investors, know much more than you do, and are happy to share their passion. This was the case in Mayfair on Thursday, where one could have bumped into companies such as Wishbone Gold (WSBN), and Prospex Energy (PXEN), their CEOs and shareholders.

I was reminded as if one needed reminding, how much better face-to-face is than Zoom et al.

Fulcrum Metals / Panther Metals

Of course, one of the reasons that we would like the small-cap index to rise is that small companies will hopefully find it easier to raise money. The dearth of IPOs has been a standout in the stock market over the past year, with even decent companies finding it difficult to raise modest amounts. The only good aspect of this is that such companies have had to up their game, to get things over the line. This may be the case as far as Fulcrum Metals, which has 6 exploration projects in Canada and is looking to raise £3m via those good people at Clear Capital. It will be interesting to see how quickly this raise progresses, given that there are already some canny investors in this mix.

A potentially decent winner off the back of the Fulcrum IPO would be Panther Metals (PALM), which owns 20% of the company, after selling its Big Bear Project in Canada last year.

Tap Global / Crypto

As far as this week’s events in the small-cap space, there was a good start for the crypto/fiat trading app Tap Global (TAP), after the RTO with Quetzal. Given the demise of many of the frauds/cowboys in the crypto space, and the latest rebound for Bitcoin, it may be that Tap’s arrival on the stock market is timely.

Inspecting Morses Club

A company that was supposed to be going the other way, leaving the stock market, may have delivered a slap to the shorters. The rise of over 200% on Friday in shares of Morses (MCL) would have been all the more painful given how may company hit the buffers in the autumn of last year, giving the bears an easy ride.

Life Sciences / Hemogenyx / OKYO / Ovoca

Speaking of the bears, it looks as though the life sciences area is going to give them a rather harder time in 2023 than in recent years. Helping the longs is the way that developments such as artificial intelligence, and the aftermath of the pandemic, means that this area is now much more appreciated than it has been for years. The best stock squeezes of the recent past have been in Ovoca Bio (OVB), and OKYO (OKYO), with the prize going to Hemogenyx (HEMO). The rise in the latter is all the more aggressive given the way that for what felt like years, the shares seemed to have a lid on them. Now the log jam has been cleared, it will be interesting to see how far and how fast a re-rate could be delivered.

Investing In AIM

Finally, as mentioned above, there have been a few people suggesting that the stock market could be heading to record highs. This, of course, is especially in the financial press. But of course, the financial press is written by journalists who are not normally experts at investment. There are “experts” who write for the mainstream media. Unfortunately, they are usually governed by having to write what they think people will like to read, or of course, what gets the most clicks.

Last week there was an article in The Times about the stock market needing a “sheriff” when most of us already know what a bad idea that is. This week, there was an article about investing in AIM, also in The Times.

Lobster Pot

As in the case of most articles about the stock market, it is all about who is quoted and the angle. This piece quotes a pundit from Interactive Investor – that is fine. The juicy quotes are from someone from Montanaro Asset Management, who argues that AIM is a “lobster pot”, high growth potential there is “illusory” and investing in AIM is “on a par with investing in unquoted firms, which we consider equally inappropriate.” Well, that’s told us. Indeed, elsewhere in the piece, we are even introduced to a private investor in AIM stocks who “just about broke even.” So, the man is clearly a genius in current stock market conditions.

Tracsis / Judges Scientific

Of course, everyone is entitled to their own opinion, as long as it is within woke guidelines. In the case of this latest article, we are recommended Tracsis (TRCS) and Judges Scientific (JDG). I hope they do well, as it is to be hoped we have a good 2023 on the AIM market. The country and AIM certainly need them to be the next Fever Tree (FEVR) or Jet2 (JET2).

AIM Funds

However, I would be surprised if most people after reading the article actually invested in AIM. The rub was more a rather large caveat emptor /project fear, and then the reader is guided by Interactive’s fund buy list including TB Amati and Henderson Smaller Companies, as well as Stellar and Octopus for IHT benefits. Hargreaves Lansdown’s Franklin Smaller Co.’s and AJ Bell with Franklin and LF Tellworth small-cap funds also made the grade.

Author @ZaksTradersCafe

Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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