Wednesday, 27 March 2024

By Callum Newman Editor, Small-Cap Systems and Australian Small-Cap Investigator

[3 min read]

Dear Reader,

All hail Gary Oldman!

Don’t know the name?

He’s a famous British actor that’s appeared in the ‘Dark Knight’ Batman trilogy. Oldman also won an Oscar for his portrayal of Winston Churchill a few years ago.

But it’s his TV show Slow Horses that I’m loving right now.

He plays a character called Jackson Lamb. He’s a hard drinking, chain smoking and washed-up old spy.

He’s a right geezer, as the Brits say.

Lamb runs an outfit of agents for Mi5 from a building called Slough House.

Except his team aren’t the crack troops of the British Secret Service.

They’re the duds that stuffed up their careers and are sent to Slough House to shuffle papers, make tea and keep out of the way.

In other words, they’re out of the hot action. Lamb calls them his ‘Slow Horses’.

But let me tell you something…

I’m the small cap specialist for Fat Tail Investment Research.

Between mid 2021 and the end of 2023, shares in the small cap sector were the ‘slow horses’ of the ASX.

They got dumped for being too risky, too underfunded, too cash flow negative and a macro-outlook that seemed all too hard.

They went into their own ASX version of Slough House…underperforming ASX blue chips badly.

However…

Jackson Lamb might say every ‘Dog’ has his day. (Agents in the show are called Dogs.)

I can tell you…

Small caps are having their day, right now, and then some.

Just this week we’ve seen two small cap stocks announce takeover proposals.

MMA Offshore [ASX:MRM] is one of them. It’s also one of my recommendations. It’s now up 97% since August last year.

The other takeover target is a real estate agency called McGrath Real Estate [ASX: MEA]. It’s now up about 40% since early February.

That’s a funny one. I first wrote about MEA in 2015!

I had it on my list of stocks to go over. My thinking was that property is due a comeback and MEA was still on the floor, price wise. Perhaps there was value there?

I never had a chance to get to it…too many other ideas seemed more urgent.

And now another company is going to swallow it up and delist it.

You can’t get them all.

But it doesn’t stop there.

In December last year I recommended a stock called Virgin Money UK [ASX:VUK]. I’d followed that one from 2016.

VUK got a takeover offer this month too.

My readers made a tidy 30% in three months. To be honest, I’d have preferred for VUK to stay trading on the market. Over time, I expected it to do much better than 30%.

This is just three examples I have a connection to. There have been others.

(Of course, not all my recommendations perform like this. And these stocks all sit in the riskiest and most volatile sector of the share market.)

Why are all these takeovers happening now?

Small cap shares are cheap!

They don’t belong in the ASX version of Slough House. (Well, most of them, anyway.)

Bigger companies are swallowing up these assets while they’re marked down from the bear market over the last few years.

That means you, as a potential small cap investor, should be considering the same thing.

Now, I don’t expect you to be able to suddenly download a list of hot potential ASX small caps. Then sift through them like an Mi5 agent with the latest supercomputer.

That’s why I do the work for you.

There are different ways of playing this small cap resurgence.

One is to look into potential takeover targets. You can see I’ve got two from the recent batch.

Another is to look into companies run by successful people.

Telecommunications firm Tuas [ASX:TUA] has been my favourite idea here for a long time. It’s up 220% since I first recommended it this time last year.

A third way to play the small cap space is to look into shares that have a connection to the hottest theme in the world – artificial intelligence. Yes, small caps and AI go hand in hand…if you know where to look.

I’m happy to share my Top 5 ASX small cap AI plays with you. All you have to do is click here.

And check out ‘Slow Horses’ the show. You won’t regret it.

Best,

Callum Newman,
Editor, Small-Cap Systems and Australian Small-Cap Investigator

Callum Newman is a real student of the markets. He’s been studying, writing about, and investing for more than 15 years. Between 2014 and 2016, he was mentored by the preeminent economist and author Phillip J Anderson. In 2015, he created The Newman Show Podcast, tapping into his network of contacts, including investing legend Jim Rogers, plus best-selling authors Jim Rickards, George Friedman, and Richard Maybury. He also launched Money Morning Trader, the popular service profiling the hottest stocks on the ASX each trading day.

Today, he helms the ultra-fast-paced stock trading service Small-Cap Systems and small-cap advisory Australian Small-Cap Investigator.

By Bill Bonner Editor, Fat Tail Daily

[3 min read]

‘Let the Messiah... the king of the Jews... come down from the cross now, so we can see and believe.’

The Chief Priests of Jerusalem

Sunday marked the beginning of Holy Week, and the day when Christ made his way, in triumph, into Jerusalem. He did not ride a warhorse. He didn’t swing a big sword, gaud himself up in royal robes or send drones to prepare the way. Instead, he rode on an ass... a donkey... and dressed in a modest robe. This was not some bogus victor, like Maxwell Taylor in Saigon or David Petraeus in Baghdad. It was a real triumph, the sort of victory that Steven Pinker might celebrate.

Even back then, the local priests saw Jesus not as a messiah, but as a provocateur... a poseur... an imposter, claiming to be “king of the Jews.” Blasphemy! They knew a king when they saw one; and he didn’t look like one. They treated him like a whistleblower or a terrorist.

Then, Judas Iscariot betrayed him... the other disciples denied him... a servant girl denounced Peter... and the crowd wanted blood.

And it still wants blood. What has changed? The New York Times:

‘Gaza’s Shadow Death Toll: Bodies Buried Beneath the Rubble

‘Gaza has become a 140-square-mile graveyard, each destroyed building another jagged tomb for those still buried within.

‘The most recent health ministry estimate for the number of people missing in Gaza is about 7,000. But that figure has not been updated since November. Gaza and aid officials say thousands more have most likely been added to that toll in the weeks and months since then.

‘The buried make up a shadow death toll in Gaza, a leaden asterisk to the health ministry’s official tally of more than 31,000 dead, and an open wound for families who hope against hope for a miracle.’

Most families have accepted that their missing are dead...

By the Sword

We have been a regular churchgoer for 70 years. We are not particularly ‘religious,’ but we keep an open mind. And whether fact or fiction, Bible stories are a good source of instruction. They tell us the way the world works... that the race goeth not always to the swift nor the battle to the strong... that he who lives by the sword, dies by the sword... and that where a man’s purse is, there also is his heart — among many other things.

This is not the world of material or scientific progress — racing ahead with gizmos and gadgets. This is the world of flesh and blood, not much improved over thousands of years.

The ancient scribes and prophets — observing it over so many hundreds of years — didn’t miss much. What they described was a ‘moral’ world, like it or not. There’s always ‘more’ to the story. And always a moral to it.

Pontius Pilate, the Roman governor of Judea, questioned Jesus when he was brought before him. He found no wrongdoing in him and suspected that the Jewish priests were just jealous of him. But the crowd insisted; ‘crucify him!’ they shouted.

Or course, people are not crucified anymore. Progress! They do not suffer on a cross for hours... days... before dying. Then again, they didn’t crucify children in the old days, either. Julius Caesar, in a display of mercy, had a group of pirates strangled before crucifying them. Who strangles the children today, before they are buried under piles of rubble?

A History of Bloodshed

Steven Pinker makes a persuasive case that we are generally less bloodthirsty today than we used to be. Few people attend a hanging for the entertainment. Few people go to insane asylums to gawk and laugh. Few people — with many exceptions, such as those who work for ‘security forces’ of the US, Israel, Russia, Saudi Arabia... or any one of dozens of other countries — still get a thrill by torturing people. 

Still, it is remarkable what goes on. 

When George Floyd was snuffed by police, almost everyone thought it was an appalling act of violence or carelessness... perhaps having its origins in race hatred. There followed days of outrage. 

That was surely a milestone in the march toward a more empathetic, less violence-prone public. But scarcely two years later, wars in the Ukraine... and mass murder in the Holy Land... suggest substantial backsliding in the march of human social progress.

And looking back, we see an almost unbroken string of butcheries — like a necklace made of human ears — stretching back to long before Jesus was born.

A Grim Record

Jerusalem must hold some sort of grim record in this regard. Placed as it is, on the likely path from Africa to the rest of the world, it might have seen extermination-level battles between Neanderthals, or other archaic human forms... and homo sapiens. Then came the Canaanites, the Egyptians, the Assyrians, the Jews, the Babylonians, Persians, Greeks, Hasmonians, Romans...

... we pause to catch our breath... 

Pontius Pilate was recalled from Judea soon after the Resurrection and disappeared from history. But the history of massacre and conquest on the shores of the Eastern Mediterranean continued. The Byzantines, Arabs, Seljuks, Crusaders, Mamluks, Ottoman, English, Zionists... a war in 1948... another in 1967 — from siege to battle... to mass murder and exile... 

... and another massacre in 2023-2024.

Who took Christ down from the cross?

Jesus’s message was that we should do unto others what we would have them do unto us. Win-win. It was such a revolutionary new creed... 

... too bad it never quite caught on.

Bill Bonner,
For Fat Tail Daily