Zak Mir looks at the stock market highlights of the week including Mkango and Metals One, while noting the 7% decline in the FTSE 100, and 8% off the small cap indices in the wake of the US tariffs disaster. Plus AIM newcomer Quantum Base
Tariff Trauma
It would appear that, just over five years on from the pandemic collapse in the stock market, we now face another blight—one that may not be quite so easy to shake off. This is particularly true if you believe that COVID was a scam and the reaction overblown. In the case of the tariff trauma, this could be one of the worst punches to the gut the economy, let alone the stock market, could receive. The only hope now is that someone, somewhere, backs down. This will happen. Perhaps, given that President Trump has said he will not back down, it could be the case that he is the one who does.
Certainly, there is no sign of the “boom” he has promised his policies will deliver. The only boom one can anticipate is if he wakes up one day and says the tariff manoeuvre was just a bargaining tactic. This is, after all, what the markets were thinking, and they played it cool initially. If social media is to be believed, those high up the food chain—such as Warren Buffett or Jamie Dimon—not only knew that a financial markets calamity was on the cards, but also took preventative action regarding their assets.
The UK Reaction
We all know the old adage: when the US sneezes, everyone else catches a cold. On this occasion, it looks as though it’s pneumonia—or is it COVID—that beckons. Unfortunately for the London stock market, the timing of Trump’s intervention could not have been worse. Already grappling with increased costs, the same red tape, companies delisting, and a government modelling itself on a 1970s Labour administration, things were looking bleak. Current events now look set to break the camel’s back. The FTSE 100 was down 7% this week, but the small-cap indices were down 8%. This may not sound like much of a difference, but the blue-chip index was near record levels before falling, whereas small caps were, pandemic aside, at multi-year lows. As things stand, it does look as though nothing can save the small caps—especially given how smug and hypocritical those who say they are in charge of change are. They just continue to take their salaries. Even worse, those on the front line and with experience, who could help (people like myself), are actively blanked.
A Stock Market Subscription Model
For what it’s worth, the only thing that would make being listed worthwhile—even for blue chips—would be to introduce a subscription model for listing. Under this model, which should cost no more than £50k a year, all the legal, accounting, and regulatory costs would be included. Yes, even the Nomad. It is the only way it could work; otherwise, one might as well remain private. I would go into this more, but as no change is going to happen, there is little point.
This Week’s Risers
Without wishing to go on like a broken record, Metals One (MET1) has been one of the great technical winners of the year to date. The shares even managed to rise another 30% this week, bringing the gain since the beginning of January to 375%. It was one of the most counterintuitive wins for traders, following the £5m raise in January. Given current events in the market, MET1 reminds us that the big wins rarely come from the obvious trades. Instead, they tend to occur when most in the market have capitulated, or simply do not believe in a company or a scenario.
A situation which may underline how belief has been suspended—and needs to be revived—was Shuka (SKA) at the end of the week. Here, one of the many Jason Brewer / Quinton Van de Burgh situations came back to life, on the basis we were always hoping for. The initial attraction here was the presence of a sugar daddy billionaire, ensuring that companies like Shuka would always have the funding they need. This week, it came in the form of a £2m unsecured CLN extension, with SKA saying: “The CLN Extension provides comfort regarding funding going forward as the Company progresses towards completion of the Kabwe Mine acquisition.”
It has to be said that current stock market conditions are enough to drive most of us to drink—if we have not already sought such measures. This brings us to premium drinks group Distil (DIS), where there has been stake-building from Dr. Graham Cooley. He may or may not be on the right track, as in March the company announced it was reviewing its strategic options. Not quite a full-blown “strategic review”—the worst phrase in the stock market lexicon—but still a difficult situation to escape from in one piece. Even with the 20% drop on Friday, DIS was up 50% on the week.
A company which ended the week on a high note, after flagging US government funding to the tune of $4m, was Narf Industries (NARF). The company is already closer to the US security services than J. Edgar Hoover, and one would expect it will be equally embedded financially and otherwise going forward. The shares closed up over 100% on Friday. One would expect a return to last September’s resistance area at 1p sooner rather than later, versus 0.68p currently.
This Week’s Risers on No News
Small-cap risers on no news are all the more impressive, given the state of the stock market. So this week, one would have been looking with particular interest at such risers. That said, Mkango (MKA) did not really rise on no news, given its Pulawy Rare Earth Separation Project in Poland will be a direct beneficiary of China closing the door on rare earth exports. Indeed, companies such as Guardian Metal (GMET) and Phoenix Copper (PXC), with their domestic US projects, have got to be winners in the present environment—along with obvious rare earth players such as Harena (HREE), Altona (REE), and Cobra (COBR). Even with the stock market tanking, these should be beneficiaries. Indeed, MKA was up 30% on the week.
A stock that was really up on no official news was Sealand (SCGL), everyone’s favourite London stock market oxymoron. However, it was noticeable that the shares were not able to rebound above their 200-day moving average at 1.3p.
Quantum Base
Clearly, the direction of travel for small caps on the stock market remains challenging. However, one of the symptoms of a bear market is that we start to see better companies list—simply because they have to, given the conditions. This is certainly the case as far as authentication technology play Quantum Base (QUBE) is concerned. While for some, its chosen field may make rocket science look like child’s play, achieving its goal of developing a new standard in its space would be a game-changer. The licensing of such technology could make the company the ARM of its sector. The group has raised just under £5m for a market cap of £15m—a decent-sized raise, providing a solid runway to focus on R&D. The reward for a timely win would be a sorely needed great British success story—and a unicorn-sized valuation.
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.
