AIM’s Outperformance
One of the best things about the FTSE 100 index quarterly reshuffles is that removing the bottom few losers and replacing them with new, stronger kids on the block, ensures that in a kind of Darwinian way, of the survival of the fittest.
On this basis alone, it is difficult to argue against the idea of merely buying an index tracker, and wait to spend all your falling off a log gains when you retire. But of course, where is the fun in that? One is reminded of this renewal and renovation process when looking at the current chart position of the AIM All Share. It is currently up 13% from its April 7 low, actually beating the FTSE 100, which has bounced around 11%, including a 15 day consecutive day winning streak Friday.
In fact, such outperformance is what historically the whole idea of small cap / growth companies were supposed to do. The interest now is that after the Tariff Low of April 7, we are on the up off the back of total capitulation? With all the sellers scared out, only buyers remain. The other point to note is that rather as in the pandemic, when we could have all have died, the situation in many areas of the economy is dire. But when the going gets tough (as in H1 2021), the tough buy small cap stocks. Alas, the rally then was helped along by Rishi Sunak’s Furlough Scheme, something which was not only good enough to rally the stock market, but buy him the Premiership. Did I really say that?
But apart from the way that it has apparently taken 4 years for AIM to get back into the groove, after saying goodbye to so many of its alumni in the interim, we have the spectacle of a rally when rather than an official reshuffle, the weakest have gone and hopefully only the strong remain. While it has to be admitted that given the costs and the pain for many companies of being listed, there could still and will be further casualties, it looks as though we are at what could be termed rather awkwardly, the beginning of the end of the worst phase. This is as much to do with the way so many companies are either valued well below any assumption of fair value, while many are already priced to fail. There are a couple of points backing this. The first is that even when companies produce blockbusting news it can take days for the price to rally. The second is that in the past couple of months, even before we have seen double digit numbers of “back from the dead” situations. Favourites of mine, largely because I highlighted them in time, have been Metals One (MET1), Fragrant Prosperity (FPP), Catenai (CTAI), Vast (VAST) and even a company which no one including the company itself has heard of Crism (CRTX), it was the old Amur Minerals.
Stocks Rising On News:
While there are several traditional indicators of when and how a bull market can start, one that can perhaps be added to the list is when someone announces a 7.3% stake in United Oil & Gas (UOG). For a company which has specialised in always to date being the bridesmaid and not the bride, the arrival of a solid TR1 combined with potentially transformational highlights shown below should mean we are off to Westminster Abbey with Kate and Wills in attendance. We are already fast approaching the 0.20p initial technical target at a December resistance line projection. But it would not appear to be too early to pencil in a 0.40p target as soon as the end of next month, while the 200 day line at 0.13p. So, a good risk/reward set up from the current 0.16p level.
Operational and Economic Highlights:
- Early two-year licence extension to 31 January 2028
- Multiple parties under NDA and farm-out process advancing
- c. 7 billion¹ barrels of potential unrisked prospective resources
- c.$8.5/bbl¹ estimated development cost and c. $25/bbl¹ breakeven in success case
- United’s Internal estimate NPV10 of c. $23 billion based on Gaffney Cline 2.4 billion unrisked mean prospective resource (at $80/bbl oil, 2% inflation)
- Attractive fiscal terms Work programme permitting underway
- Strong government support
Nanoco (NANO) caught the eye this week not only with its new Asian customer announced on Monday, but also its intention to sue electronics giant LG. While the latter may not necessarily be the cause of the 44% rise for the shares on the week, the charting set up does somewhat suggest that at least one of two punters are chancing their arm on such a prospect.
While the stock market cliché is that it is better to travel than arrive, it was the case that Ukraine focused Ferrexpo (FXPO) was rising both before and after the announcement of a minerals deal between Kyiv and Washington. While one wonders how happy Mr Zelensky and friends were to do this deal, at least shares of FXPO were honoured with a 40% rise on the week.
The rebooted Wishbone Gold (WSBN) said it has now appointed Apex Geoscience Consultants to manage the day-to-day on the ground exploration and upcoming drilling program at the Red Setter Dome to the southwest of the +15Moz Telfer Gold Mine, Western Australia. While the “next to” “close to” concept does not always work well in mining, or anywhere else, “I live next to Warren Buffett”, there is little doubt it has helped to push the shares up 40% this week.
Insig AI (INSG), the data science and machine learning solutions company has been a rare tech winner, with sales and orders. It announced that trading for the fourth quarter and for the year to 31 March 2025 has been ahead of previous management guidance. Revenue for the fourth quarter was £249k, equivalent to 90% higher than the third quarter and 210% higher than the second quarter. While we are not quite at Magnificent Seven territory yet, the bar is so low as far as UK tech plays of any kind, that INSG is already on its way, especially with the big, new client win announced this week. The stock has been highlighted on Zakstraderscafe almost exclusively, as I know that Richard Bernstein, the CEO is very capable. INSG shares were up 39% this week and could hit 40p by the end of this month on a charting perspective.
Christie Group (CTG), a provider of Professional & Financial Services, announced its audited preliminary results for the 12 months ended 31 December 2024. Revenue on a continuing basis up by 15.4% to £60.4m (2023: £52.3m). Operating profit before non-recurring costs improved to £2.0m (2023: £0.3m). The swing to profitability was the big win here, over and above the backing of everyone’s favourite investor, Lord John Lee.
Emmerson (EML) has become one of the small cap’s coterie of litigation plays, as the Morocco-focused potash development company said it has submitted a request for arbitration to the World Bank’s International Centre for Settlement of Investment Disputes. Emmerson said it is bringing a claim for full compensation in respect of the Khemisset potash project which it had internally valued at USD2.2 billion, and that all legal costs and “a significant portion of [general & administrative] costs” will be funded through its $11.2 million litigation funding facility. While this is all very well and good, it does beg the question to why developing countries continue to treat those who invest in them in such a poor way. It almost seems as if they want to be regarded as flaky jurisdictions. EML shares managed a one third rebound, although we trading even higher during the week.
Aptamer Group (APTA), a developer of next-generation synthetic binders delivering innovation to the life science industry, said it has entered into a global licensing agreement with the University of Glasgow for the commercial use of a developed panel of Optimer binders as vaccine adjuvants in the swine health sector. Hands up everyone who knows what a vaccine adjuvant is? One would presume that even Frederick Sanger would be scratching his head. Nevertheless, enough people clearly know their adjuvants from their agitants, to spike shares of APTA by 35% on the week.
Although it may not have looked like it to some, the announcement by KEFI (KEFI) the introduction of BCM Group as a Project syndicate member, was the trigger for a decent spike in the shares by the end of the week, although it was speculation regarding the Ethiopian Council of Ministers on Friday that finally gave the share price rise KEFI’s long suffering shareholders have been looking for.
Gfinity (GFIN) was all aglow regarding its exclusive licence agreement with 0M Technology Solutions Ltd to commercialise 0M’s advanced artificial intelligence technology, Connected IQ, which is specifically targeted at the connected video market, and the formation of a new venture, Yentra.AI, which will provide engineering, consulting and training services to companies looking to utilise AI. In other words, the company is getting on the AI bandwagon. Now, what was it trying to do before this reboot?
Xtract Resources (XTR) looks as though it has finally grabbed hold of and is running with a decent asset. In this case Australia and Zambia-focused miner reported assay results for first three diamond drill holes at the Silverking project in Zambia. “Notable high-grade copper” and “silver intercepts achieved over impressive mineralised widths”. These include 4.15% copper and 42.91 grams of silver per tonne in Borehole SKIDD003. Even more helpfully the market has cottoned on to what XTR is doing and served up an 18% rise for the shares on the week.
Stocks Rising On No News
This is by far the most interesting and intriguing part of the Week In Small Caps, as one can let one’s imagination run wild (within reason) as to why someone would part with their hard earned cash to buy shares just for the sake of it. Top of the list is Phoenix Copper (PXC) where we are just sitting on the edge of our seats waiting for the copper bond to come in, especially after the recent £300k subscription into the stock at 3p by a stock market grandee. The shares ended the week up 14% at 4.85p. In the same category of mystery buying is Reabold Resources (RBD), a company with not just one but two CEOs, a kind of Butch Cassidy and The Sundance Kid act. I would not want to say what this is analogous to, but it is to be noted that BP and Shell only have one CEO. The last we officially heard from RBD was its ongoing doubling down in Colle Santo. Rome Resources (RMR) is more straightforward as a no new news riser given the improved DRC security position, and the way the company can now just get on with the job of discovering tons of tin. Mosman (MSMN) had no new news, but an excellent interview on Zakstraderscafe. I say an excellent interview, not only on the basis that I thought CEO Andy Carroll served up a great rundown on his company, but social media said it was an excellent interview. This still makes me wonder why so many CEOs still use platforms run by amateurs, used car salesman, cowboys, and gangsters, or in some cases a combination of all of the above. But hey!
Finally, shares of drug discovery and development company Immupharma (IMM) were up 41% off their own back. We have not had a significant announcement from the company since March’s news of the unique mechanism of action of its P140 autoimmune technology platform.
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.
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