Now And Then
Although the stock market has had a decent week, the highlight of my week was the release of the new Beatles single, Now and Then. We can quibble about whether this really is a Beatles single, or of course whether it is any good. But given the lay of the land both geopolitically and economically, it may be worth at least allowing ourselves to succumb to the positivity of the event. I first got into The Beatles at Christmas 1979, when all their films were shown on the BBC. Over four decades later my interest in the Fab Four has not subsided. Perhaps if given the choice all those years ago between being a songwriter and doing what I do now, the former may have triumphed.
In fact, the reason that I do what I do now is probably related to the way that in the autumn of 1973 a new radio station called LBC began, and as a 7 year old I would listen to the morning stock market report in the car radio on the way to school. Alas, there are a lot of similarities between the world in 1973 and that of 2023, both in terms of Middle East trauma and stagflation. This 50 year perspective is useful of course as it gives a measure of the cycles that the market goes through and the sentiment attached to this.
Peak Interest Rates
What was interesting this week what was interesting this week is the way that it seemed, interest rates may have peaked, and the worst is over as far as inflation is concerned. This may be all very well on a macro view of the economy, but of course the only way that we have been cured of inflation would have been through massive financial pain amongst consumers, and the threat of companies going bust and higher unemployment. Just as there will be a delay in the effect on the housing market, there will also be a real world effect delay in the High Street and beyond and this is something that many may not yet be prepared for. At least in the UK if the government has any chance of being re-elected there will have to be a series of measures designed to mitigate the negative effects of high taxes and interest rates, which is just about the only leverage voters have going into the general election next year.
Bulletin Board Heroes
Having been into the stock market for 50 years, I have been aware of all the fundamental and technical rules that surround this area. For instance, the January effect, Sell in May, it never hurts to take a profit, as well as all the other common sense advice such as only investing in profitable companies that pay a dividend, low PE ratios, and the value trap. There may be somewhere between some merit, and hardly any merit in the above sayings. For me, the overriding message as far as trading or investing the market is concerned is that it is a skill, that some people have and most people do not. Many people play the guitar or piano, or write songs, but few get to the level of The Beatles. Nevertheless, in my current job, the idea of helping people make money on the stock market has always been a goal. Hence the bulletin board heroes video where I look at the best charting setups of the day, and the RNS Hot List where I try and pick out the shares that will move up off the back of the latest company news.
November To February
A few months ago though I was looking at the long term chart of the FTSE 100, and I was reminded that for many years I have noticed the way that there is a November to February effect for the stock market. From this I came up with the idea of buying in the first week of November and selling in the second week of February. The rationale behind this is that in a good year by the beginning of November, if the market has been strong enough to rise during September and October, it should continue to do so through to the end of the year. In a bad year any sell off there has been during the early part of the autumn will have normally run its course by the beginning of November and then investors can enjoy the typical window dressing that we see during December and going into the new year.
This momentum tends to be boosted by money coming into the market for the new year and even in a bad year we see that this positive momentum last until early February. Of course, it can continue to go on. But if you are looking for one of the better windows of opportunity in the stock market during the year November to February seems to be the one. Of course, I imagine this is not going to be a very popular adage amongst those who work in the investment world given that it implies that one only needs to be involved in the market for three months or so, and can then retire to a tropical beach. But at least for this year the idea of buying at the beginning of November has so far worked against a very dismal fundamental backdrop, and it will be interesting to see if by Valentine’s Day those who bought this week are sitting on a profit. Given that my rule particularly applies to blue chips rather than small caps, it would be hoped that some of the positivity trickles down to the minnows.
As far as the highlights of the small cap area it was pleasing to see some of the situations championed of late, before they rebounded, having a good run. In particular, Cadence Minerals (KDNC) was high on the leaderboard, as the combination of the accelerated timelines at Amapa, the latest director share buying, and perhaps the realisation that a £12m market cap really is quite mean given the progress the company is making.
Capital Metals (CMET) was up as much as 50% on Friday, having been called higher in the Bulletin Board Heroes on Thursday. Apart from the charting skills, the company also delivered a well received investor presentation on Friday morning.
Audioboom (BOOM), the podcaster, was able to boast 1 billion impressions during the week, something which caused the shares to rise by nearly 30%. The company was also helped out by a Cavendish note suggesting a 1,300p a share target versus the weekly close at 174p. Unfortunately, the company is still carrying shareholders in at nearer to £20, sucked in by takeover talk early last year. They will be hoping that a FAANG or two turns up to knock on BOOM’s door in 2024 to get them back on side.
It is always good to focus on stocks that have risen off the back of no news, something which ValiRx (VAL) managed. Here the shares were up over 50% on the week despite the way that the company announced last month that it knew of no reason why the shares had risen. Clearly one or two people are adding one and one to make three, as far as the possible benefits of potential M&A with regard to companies in its sector.
Powerhouse / Hydrogen Utopia
Going the other way was waste plastic to hydrogen group Powerhouse Energy (PHE), as it beat the retreat from its JV with Hydrogen Utopia (HUI) in Ireland. The market has already been told that PHE is set to pivot towards engineering services, but it would appear that the bears have so far been able to prevail, even though it could be argued that the company’s new strategy would be a quicker way to gathering revenue.
Upland / Eurasia
Last week after the close we were sitting on the edge of our seats waiting to see how Upland (UPL) shares would perform after the demise of the “offer” for the company. This week those who actually look forwards to the stock market opening on Mondays, may be waiting on Eurasia (EUA). It could be argued that the diversified mining group has not been great at putting its best foot forward in recent past, and so the announcement of a winding up petition with regard to £108,000 rather goes with the territory. Hopefully, this incident will cause the company to go for a more positive engagement with the market going forward.