11/06/2023

Goldman Sachs

The doom and gloom merchants of the mainstream financial media have been commented on here many times. The latest non triumph for them and the economic pessimists is the way that the US stock market has rebounded enough to be classed a being back in bull market territory. This adds to humble pie (or perhaps not), at Goldman Sachs, where their original target for 2023, 3,600 on the S&P, has been increased to 4,500. Unfortunately, given the track record of such predictions, they may have been right the first time. To think that 35 years ago, when I was young, I would loved to have a job at Goldmans, but would never have got in. I can see from the S&P flip-flopping, exactly why: they do not hire people for their forecasting skills. Presumably whoever made the dumb call has degrees, passed dozens of tests and psychological assessments, and none of it was worth a dime.

UK Investor Show

Getting down to the small cap area, and this week I ventured down to the UK Investor Show on Friday, one that had been postponed from last month due to the rail strikes. It may be that being on a week day reduced the footfall, or that most people prefer online to find out about companies, or just that the weather was too good, but the event was less well attended than usual. Of course, it is not that the small cap area is exactly flourishing at the moment. This is despite the way that for many companies, after the slow down in newsflow due to the pandemic, it is noticeable that we have returned to normal, and in some cases, the log jam breaking has led to an acceleration in progress.

Hummingbird Resources

For instance, this week we were treated to the first gold pour for Hummingbird Resources (HUM), at Kouroussa. Given the naysayers that have been one the case as far as the gold production company has been concerned, the news from Kouroussa is all the more sweet. One can now say that the company is on its way, although the share price recovery has been in play for at least a couple of months.

Oracle Power

A share price which has only just started to recover is that of Oracle Power (ORCP). A little like the situation at Hummingbird, it is clear that at ORCP the market has been very demanding in terms of seeing the project developer gets over the line. These things tend to be somewhat subjective. However, recent weeks have seen the company settle its Northern Zone Gold Project, and ink a 1.32 GW coal power plant deal for its Thar project in Pakistan. Since then the group has also pushed forward with PetroChina for its green hydrogen project. The key here is to get on the back of Pakistan’s massive energy shortage, something that will hopefully be addressed with not only the type of deals ORCP has already revealed, but the country pushing on with solar and wind projects too. All of this would be plenty to chew on for a large infrastructure group, let alone a company whose market cap is currently only £4.7m.

Nuformix

While it may not be quite the right analogy to say that pharmaceutical development company Nuformix (NFX) is a phoenix rising from the ashes, it does seem to be NFX 2.0. The benefits of CEO Dan Gooding having returned to the company and running a tight ship are self-evident. Last month’s positive data revelation regarding flagship NXP002, being developed as a novel inhaled treatment for Idiopathic Pulmonary Fibrosis seem to be finally getting reflected via a rebound in the share price at the end of the week.

Mobile Streams

One would also venture to suggest that Mobile Streams (MOS), the mobile content provider, is finally turning the corner in terms of its share price, and market perception. It should be the case that after kitchen sinking its financials at the end of March, there is everything to play for in terms of meaningful revenue coming in. Recent deals with Cadiz, and Bitso should ensure that the “administrative costs” are more than covered going forward. Like the example of the CEO at NFX, we know that CEO Mark Epstein is grafting hard to get the turnaround going for MOS.

LifeSafe

There was a near 20% jump in shares of fire safety group LifeSafe (LIFS), as the company revealed that it had achieved a sales outperformance for the start of this year. Perhaps just as important to the market – sales have been strong all along, was the news that in addition to the finance facility announced in March, LIFS has entered into a new 150-day, £250,000 trade finance facility. The implication of this is that the group will have enough cash to cope with the sales expansion.

Sovereign Metals

One of the small cap market’s most significant under the radar companies is mining exploration and development company, Sovereign Metals (SVML). After an extended period of bumping along the bottom, we saw the stock improve off the back of excellent data from its flagship Kasiya deposit in Malawi. The kicker here is that the graphite found here is said to be spot on for use in Lithium-ion batteries, adding to the company’s strength as far as mining Rutile.

Acuity RM

Keeping up the momentum this week, despite the name change was Acuity RM (ACRM), the company formerly known as Drumz. This was understandable given the way that the market is clearly catching onto the opportunity of Acuity’s Stream integrated risk manager software product, and how important this is especially given current cybersecurity risks. The stock was up nearly 50% over the past 5 days, ending the week with another new customer.

Zenith Energy

Finally, a stock which perhaps should / could have been up by nearly 50% was Zenith Energy (ZEN). It announced that the energy company, which has recently launched a U.S.A. expansion programme, is to sue Tunisia, off the back of allegations that the country has been obstructive to those attempting to sale oil produced in the country. The sizzle here is that ZEN will be acting with a “no win-no fee” lawyer, something which given the potential $48m payout, and current £10m market cap of the group, sounds like a decent risk / reward play for those with a punting mindset.