Record Blue Chip Highs
Blink and you missed it, the FTSE 100 on Friday managed to temporarily hit a new intraday record of 9,222. This is of course totally at odds with most of the sentiment in the market .
But as we know the stock market can be a contrarian place. One can also add to this the concept that it is known for discounting future events, whether on the downside or the upside. We can only hope that the blue-chip index is discounting some great news. Of course, this could be a resolution of Russia-Ukraine, or that taxes will not go up in the autumn, or just that many FTSE 100 constituents derive their income from abroad. There is the added insistence that the UK stock market is trading on a far lower multiple than many international peers.
Such wonders though, still elude the small cap space. There was an early summer heatwave provided by the Bitcoin Treasury Strategy brigade. However, after the retracement we have been treated to, this can only really be resolved by Bitcoin going through the roof, or the best in class moving ahead of the pack.
The latest thing that some in the market are looking to is an Ethereum boom. This comes off the back its founder, Joseph Lubin suggesting that ETH could overtake BTC in the next year, quite a forecast. But to quote Mandy Rice-Davies, he would say that wouldn’t he? Equally, eyebrow raising is the comment by Fundstrat Head of Research Tom Lee that ETH is the biggest macro trade of the next 10-15 years. Apart from not having heard of Fundstrat, it is good to know that there is a decent trade with a timeframe to see me out. A company who most of us have heard of, JP Morgan, have said that ETH should gain as a way of getting exposure to the expected growth in stablecoins, as it is the Ethereum network which hosts most of these stablecoin assets. There may also be the sizzle of saying that if Bitcoin is a gold rush, then investing in Ethereum is like investing in picks and shovels for the gold rush, or equally, the inftrastructure of digital assets.
At the moment, the best we can do in terms of UK shares exposed directly is KR1 (AQSE:KR1), and Blue Star Capital (BLU) indirectly. In the US, as you would expect, they are further ahead of the curve. The best of the bunch there are BitMine Immersion (NYSE: BMNR), SharpLink Gaming (Nasdaq: SBET), and notably crypto exchange Coinbase Global (Nasdaq: COIN).
Stocks Rising On News:
One of the specialities, and goals of Zaks Traders Café is to shine a light on companies that have a combination of a low profile, and could be about to deliver a positive turn. In the case of Far East focused financial services group ICFG (ICFG), the shares were up nearly 150% on the week. The trigger for this was news that the company had obtains a specialised life insurance licence in Mongolia and entered a strategic partnership with Mobicom Corporation. Of course, most in the market would not have heard of the company, and / or missed the move. But having met the company some 6 weeks ago, and been presented to, I was ready to chart the shares at the first move. It was clear that even without the latest news the shares with a market cap of as low as £40m were simply too cheap. The market cap is now close to £90m, much more like it.
Another stock which I have been familiar with, in this case for a long time, is Finnu (BANK). Here the shares have continued to climb in the aftermath of the announcement of having entered into a RTO for the proposed acquisition of Everfex P.S.A, earlier this month. We were treated to a further 45% gain on the week, as the market warmed to the deal. This is not surprising given the way that Everfex is an FX brokerage firm which executed over $1 billion in spot, swap, and forward contracts traded in 2024. The shares are well up on £800,000 raise at 10p, closing the week at 14.5p.
As I said during the week, there is a Holy Trinity of small cap rare earths (Altona (REE), Harena (HREE), Cobra (COBR) ready to shoot higher in the wake of the tariff wars. This is as China (CHAI-NA), turns the screws on supply, but still wants everyone to think it is a touchy feely tyranny. To be fair, as far as tyrannies go, it probably is. The news this week that caused shares of Cobra (COBR), the mineral exploration and development company focused on the Boland Project (ionic rare earths) in South Australia, to rise by a third was of low cost recoveries from optimised testing.
The aforementioned Harena Resources (HREE) was up 26% on the week, as it was revealed that Interactive Brokers are in on the shareholder register at 8.26%. HREE is another ionic clay rare earths play, this time in Mozambique, and with an asset which could be worth up to $6bn. The market cap is still only £9m. The benefit of ionic clay rare earth assets is that they are much cheaper to extract than their hard rock counterparts. I went for an initial 2.2p share price target here, even before the shares broke resistance at 1.6p. The ended the week at 1.9p.
For Ondine Biomedical (OBI), a Canadian life sciences company pioneering light-activated antimicrobial treatments, the drip-drip of positive newsflow particularly the latest first Mexican hospital Steriwave deployment, saw the shares rise by over a quarter this week. Perhaps there was an extra boost from this news which hints that the testing and trialling is nearing its end, and the company can now fully monetize its offering.
Active Energy (AEG) managed to bask in the glory of energy storage being the new rock and roll, especially the battery variety. Shares of the alternative energy company focused on the deployment of renewable infrastructure and the integration of advanced digital technologies rose 26% on the week, as it announced the signing of Heads of Terms to develop a 150MW Battery Energy Storage System in the Vale of Glamorgan, in partnership with Fonmon Castle Ltd. AEG said “This project is designed to support the UK’s transition to clean energy and strengthen national energy security.” We can ignore the similarity of comments here to that of EnergyPathways (EPP)…
Shares of Mkango (MKA) have risen over 4x since January when the company announced that it had signed a letter of intent with Crown PropTech Acquisitions to list Mkango’s Songwe Hill and Pulawy rare earths projects on the Nasdaq. They rose another 22% this week, as some lucky person exercised 3m warrants at 7p, versus the Friday close of 43.5p.
TruFin (TRU), the payment provision, invoice finance and mobile games publishing group, said it was to beat market expectations with its full year expectations. The result was an 18% rise in the share price. The charting position is strong enough to suggest a move to as high as 160p over the next couple of months versus 118p now, especially while we are on the right side of 110p.
Stocks Rising On No New News:
The juiciest section of the Week In Small Caps, apart from whatever middle-aged rant leaks out in the opening paragraphs, is usually Stocks Rising On No New News. Shares of Critical Mineral Resources (CMRS) have risen almost vertically so far this month, with nothing really new here on the news front since the Moroccan copper JV announcement at the end of May. The chart suggests that above 2p, versus 3.3p now, we could still stretch to last year’s resistance in the 4p zone.
Last month’s CEO buying at Tavistock (TAVI), the financial advice and investment management firm has helped the stock rise 44% over the past week. It is interesting that we are perhaps rather overdue a significant update from the company.
Shares of Ferro-Alloy Resources(FAR), the vanadium producer and developer of the large Balasausqandiq vanadium deposit in Southern Kazakhstan were up 38% this week on no fresh news. It is nearly two months since the company announced progress in the development of the carbon black substitute product and an update of the Feasibility Study on Phase 1 of the Balasausqandiq Project. It would appear that the shares are revving up for an assault on 2 year highs through 10p.
It is perhaps not surprising that shares of Surface Transforms (SCE), THE manufacturer of carbon fibre reinforced ceramic automative brake discs, have risen a further 36% this week. This is after the company announced it was to post 70% revenue growth, so a natural ongoing re-rate.
Audioboom (BOOM), the podcast group, has in the past suffered from selling into what have been very encouraging looking rallies. Presumably, after the recent pivot to the videocast strategy, and a revenue boosting acquisition in the form of Adelicious, the pesky seller / shorter might finally head off to the sunset.
There was no new news at First Development Resources (FDR), but some mentions here, and an interview, helped boost the Australian focused exploration company with mineral interests in Western Australia and Australia’s Northern Territory, see its shares up by nearly a fifth on the week. The coverage in the Midas Column last weekend clearly did no harm either.
After an already massive rally, it was another solid week with a 25% rise, for Mast Energy Developments (MAST), after the announcement the previous week, that it had signed a heads of terms for an exclusive joint venture to develop, construct, and operate AI datacentre power supply solutions. The shares are now up 10x so far this year.
Disclaimer & Declaration of Interest:
The information, investment views, and recommendations in this Zaks Traders Cafe interview are provided for general information purposes only. Nothing in this interview should be construed as a promotion or solicitation to buy or sell any financial product relating to any companies under discussion or referred to or to engage in or refrain from doing so or engage in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the commentator but no responsibility is accepted for actions based on such opinions or comments. The commentators may or may not hold investments in the companies under discussion.
