It took a lot of effort, but the Bank of England’s fiscal policy has finally got the UK into a recession in the last quarter of 2023. This is great news for the unelected body, as its lobbying against the Conservative government means that it is about as unpopular as it is possible to be. We witnessed this, helped along by Reform UK dividing the Tory vote, at this week’s by-elections. We have been told that the Spring Budget will be a chance for the Chancellor to win back some popularity with tax cuts, but this is very unlikely to happen for at least a couple of reasons. The first is that this is likely to be too little, too late. The second related point is that the Conservatives’ devotion to big State / high tax, and centrism in general means that effectively they would rather be kicked out of power than abandon Globalist / World Economic Forum / EU friendly policies. The centrist “tyranny” we have had since the time of John Major has to continue, with Sir Keir Starmer being the latest example of elective dictatorship to deliver us the same unvoted policies for the fourth decade.
The Nascent Bull Market
I am calling where we are a nascent bull market. At least for small caps 2024 to date has been, if not a bull run, the end of the worst of the bear market. Added to this is the way that the mainstream is effectively calling the end of the London stock market, and the mainstream media tends to be an excellent counter indicator in this and many such matters. In fact, the FTSE AIM All Share index flipped above its 50 day moving average in mid November, and has stayed above it even on dips ever since. Even better, we have been above the 200 day line since the end of last month, so on that basis we are actually in a bullish trend. The evidence for this has been shown in a real world way with such multibagging highlights as Helium One (HE1), Renalytix (RENX) and IPO Microsalt (SALT). Indeed, Microsalt (SALT) more than doubling from its IPO price is a very good indicator. The last time we saw IPOs fly was early in the pandemic, when IPOs like Bens Creek (BEN), Tirupati (TGR) and Pensana (PRE) were all listed at bear market prices, only to be met by a surge of liquidity in the months that followed. It is as logical that at the end of bear markets valuations get too low, just as we seem them get overcooked at the end of a bull run.
Charting Calls
Another personal indication that we are going into a bullish phase is that the charting calls made in the daily Bulletin Board Heroes start to overshoot the run way, or in some cases blow the doors off. The call on Helium One broke the 2.9p gap floor target, on Renalytix the call last Friday week was that the shares could hit 25p, they peaked at 71p just a couple of days later. With Microsalt “above 60p, they could go to 100p by the end of March” became by the end of the week. While having over 30 years of charting experience helps to get these right, so does decent momentum in the market. Nevertheless, I await a lifetime achievement award for services to the retail investor!
New Contenders
Given that Aquis needs all the love, and coverage possible, it seems appropriate to look at some of the stocks that have flourished there in the recent past. For instance, after many years of positioning, it would appear that Coinsilium (AQSE:COIN), the Web3 investor, advisor and venture builder looks to finally have got its formula correct. Of course, it helps that cryptocurrency’s have come of age, as has Web3. The £5m market cap could be seen as a pittance, if we get the kind of rally in the digital economy that we had in 2017 once again. The same could be said of the Gibraltar technology group Valereum (AQSE:VLRM), after it announced the completion of the acquisition of the GSX Group. The new management seem to have the bit between their teeth. Someone who always has the bit between his teeth is David Lenigas, Chairman of Vinanz (AQSE:BTC). Here the shares have risen almost vertically in recent weeks, helped along by not only the rise of cryptos, but the Bitcoin mining company with operations across the US and Canada, saying that it will be expanding into alternative cryptos. It could very well be that the timing is spot on here, and Lenigas will deliver a big, and lasting win for shareholders.
ChallengerX
Of course, it is easy to look in the rear view mirror to see what companies have caught the zeitgeist. The trick is to identify the new ones. ChallengerX (AQSE:CXS), is a company which has perhaps been under the radar. But it looks ready to emerge. Previously, it was focused on “employing both traditional and non-traditional marketing strategies”. In August, and largely missed by the market, it delivered news that will give it a scalable, international revenue stream. This is in one of the profitable sectors in the world: gaming. Even better, we are looking at a company which will be providing the “picks and shovels” of gaming, a gaming app. In this case it is called Flashbet, a app with a US patent. This is a big deal given the way that the US is rapidly opening up sports gaming, and to date 38 states and the District of Columbia have legalized sports betting. All that ChallengerX needs to do now is to license Flashbet across as many jurisdictions, to as many gaming companies, and offer as many sports as it can muster. On Friday, Nick Martin, a director of Flash Corp, which owns Flashbet, was appointed Executive Director of ChallengerX. One would expect this to be the starting gun on the rollout of Flashbet. It is perhaps worth acknowledging that the stock market is not famous for many £5m market cap gaming companies, they are normally worth hundreds of millions, or indeed, like Playtech (PTEC), billions. Indeed, in the current gambling aware environment, Flashbet’s small stake, accumulator bet, may steal the lunch of many existing players.
Xtract Resources
During the week Xtract Resources (XTR) received approval from shareholders to sell its stake in the Manica gold project for $15m. While $15m may not be a big number to sum, it is rather more than the current £8.6m market cap of XTR, and we remain in a rather cynical small cap market, this is quite an achievement. There will be a lot of exploration companies in the resources space who dream of such a result. One would hope that at some stage soon the market will tip its hat to Executive Chairman Colin Bird. The company has said it will now be focusing on its other interests in Bushranger, Australia, and Eureka and Kalengwa in northeast Zambia.
Hydrogen Utopia
On the face of it Hydrogen Utopia (HUI) has been one of the more impressive plays on the London market. It managed to move from Aquis to the standard list of the London Stock Exchange last year. It has a very determined management team in the form of Binkowska, Mann and White. In the Ohrid medical cannabis deal, it has secured its financial runway to get to the Promised Land of building its first waste plastic to hydrogen plant. Earlier this month HUI bought land next to its cannabis to build one. So the company should be all set from the time the first cannabis lands this Spring, and the necessary licenses obtained. However, the company was listed in early 2022 at 7.5p and the shares are now 5.75p, something which means the market has not exactly been wildly appreciative of the company’s efforts. Taking the company private ahead of Ohrid production would actually be a possible (revenge) option due to the lack of stock market rating. That said, one could say this of over half the companies listed on the London market. The other better scenario, and one that could materialise at HUI, if we really are exiting a bear market, is that the company is a sitting duck for M&A. It is on a premium exchange, just ahead of significant revenue, and on track to trigger an international rollout of renewable energy. This might explain why the shares are already up 70% this year. It really would be a shot in the arm for small caps if HUI had third party interest for the reasons described.
Wildcat Petroleum
Speaking of a cynical stock market, it may appear to some that Wildcat (WCAT) has been crying wolf regarding its prospects in Sudan. That said, last month WCAT said the Sudanese Oil Ministry indicated that it will sign a service agreement for the firm to increase oil production at the Bamboo oil field. Clearly, we have something of a Man From Del Monte situation here, in this case more accurately the man from the ministry where shareholders could have quite a transformational deal on their hands. What may be just as relevant is that with a market cap of less than £7m, the valuation of the company is option money, especially near recent 0.2p share price support.
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