Small Cap Week, Sunday, August 4, 2024 – Share Talk

Southport

After a shocking week, it seems inappropriate to talk about the stock market. Any parent, like me, will be horrified by the events in Southport and then by the general reaction.

Author @ZaksTradersCafe

What may not have been said in the media is that the causes of these crimes, which seem to be increasingly frequent, should be investigated. That said, there is a fear that a public inquiry, or something similar, will not be conducted.

Work

In the aftermath of Labour’s victory on 4 July, I spoke to many Conservatives who were licking their wounds and resigning themselves to five or more years in the wilderness. But I did not see it that way. I have been in politics since the general election in February 1974, and the country was essentially ungovernable. It remained so for much of the next decade, until the end of the miners’ strike. It is the 1970s all over again. People are on edge since the pandemic, both financially and politically. As a result, whether it is Boris Johnson, Liz Truss, Rishi Sunak or Keir Starmer, political authority, democracy and the rule of law are all at an all-time low. I said a month ago that Keir Starmer and his friends would be lucky to last a year. The Labour Party's reaction to Southport, the winter fuel payment, VAT on tuition fees, all this is Labour shooting itself in the foot. And it's only just begun. Yes, change was needed. But people may discover that the only thing worse than a Conservative government is a Labour government.

The collapse of the United States

Weak employment numbers and the Fed’s delay in cutting interest rates were the main reasons for the stock market declines at the end of the week. The situation was not helped by the escalation of tensions in the Middle East. Part of the correction is related to the time of year, when traders and investors head to the beach. We could expect another year where stocks will need a sell-off in the fall. This is especially true since stocks traditionally rally in anticipation of interest rate cuts, but fall when they are actually implemented. The market is concerned that the Fed has waited too long to avert a recession, even with rate cuts.

Georgina Energy

With many small caps leaving the UK stock market and/or failing to get their audit done in time and being suspended, any company that actually joins the market stands out. I mentionedGeorgina Energy (GEX)several times in recent weeks, having met with the company several times since its first listing attempt just before the pandemic. Management have certainly been around the block, and the listing delay has worked in the company’s favour, both in terms of time for helium and hydrogen in the sun, and also in terms of progress on its milestones. The money invested in its Australian projects as a private company means that today, as a listed company, shareholders have less cash to fork over, and it is much closer to production than many similar companies. The prospect now is that it will become a leading producer, and the risky valuation of 124p P50 produced by Oak Securities this week is a figure to aim for. Indeed, it would seem that investors are already aiming for it. GEX came to market on Tuesday at 12.5p. It closed the week at 18.4p, a fairly attractive result, especially in current market conditions.

Resources about Rome

Speaking of Oak Securities, which currently appears to be single-handedly trying to repopulate the London stock market, another of its deals,Rome Resources (RMR)The Sunday Times ran the headlines this weekend. The company listed on AIM via an RTO with Pathfinder Minerals just days before the GEX, and already appears to be attracting the spotlight. CEO Paul Barrett told the paper that the reason for the London listing is that local investors are willing to back African projects and African risks. Just as importantly, the company is mobilising rigs at North Bisie in the DRC, and news of the start of drilling on its high-grade tin assets is imminent.

Oil and Gas in the UK

Speaking of hydrogen, the element was certainly in the spotlight this week when it came to UK Oil & Gas. Here, shares have already rallied nearly 4x in recent weeks. This was offset by news that its strategic underground hydrogen storage projects in Dorset and Yorkshire have received a key new letter of support from RWE. Given the farce that is Labour’s net zero energy policy, we’re going to need all the energy storage we can get. With UKOG now debt-free, it seems safe to finally get in on the bulls.

Metals One

Finally, while the stocks mentioned above have all been in the bulls’ crosshairs, it seems that more investors should be looking at Metals One (MET1). I interviewed CEO Jonathan Owen once again this week, and the story seems to be confirming itself.

The company exited Gunsynd in May, doubled its resource estimate at Black Schist and announced drilling at the Rna Ni-Cu-Co project in Norway would begin later this month. All of this should be more than enough to boost the company's market cap to $2.6 million heading into the fall.

Author @ZaksTradersCafe