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Your stock market edge

It is difficult to look forward to 2024 without some degree of trepidation. After all, just because 2023 was exceptionally bad for most small caps, we are not necessarily due any recovery for 2024. I remember the suggestion in the wake of the H1 2021 pandemic bubble, after the initial pullback, suggesting that those who wanted to sell out will have done so. That might have been the case at the time. But as we have seen, plenty of new sellers came to the party subsequently in 2022 and 2023. In addition, hardly any of the aspects that have got the UK stock market to be way behind the USA, have been addressed. UK Governments from John Major onwards have used the stock market as a sitting duck for taxation and red tape, with the EU adding another layer of draconian regulation, such as MIFID. All of this Kafkaesque nightmare remains with us, partly because most MP’s are lawyers, and the more rules there are, the more money lawyers / accountants make.

One a more macro view, conventional wisdom is that inflation coming down, means that interest rates will come down, and people will have more cash to invest in the stock market. I hope that this is the case, if only on the basis that company valuations are totally out of line with reality –  currently they are just representative of where the last desperate seller was happy to get out.

Biotech Revival

I look at the USA stock risers in the daily USA Chartbreakers video. The noticeable aspect over many months is the way that the US stock market of late has been dominated by tech, mostly AI, and biotech. Obviously in the case of the UK, this has not been the case. What tends to happen here, after 6 months to a year, some bright spark will list a company with blockchain, or AI in the name. This is usually as the particular bubble is bursting.

However, the start of 2024 has already seen something of a biotech frenzy in small caps. The companies to benefit include ANGLE (AGL), C4X Discovery (C4X), Lunglife (LLAI), and ReNeuron (RENE). Indeed, even Evgen (EVG), N4 Pharma (N4P) and e-Therapeutics (ETX) have jumped. Of course, until this week the stars of the show for 2023 were Poolbeg (POLB) and  hVIVO (HVO). One expects them to push ahead well in 2024, against this more positive sentiment. This is especially the case if it is judged that biotech will be particularly benefited by advances in AI.

Away from the biotechs, to start 2024, we were treated to what could be called some falling knife rebounds. Horizonte (HZM) has bounced back from the dead, after securing funding for Araguaia, just after Christmas. If it really has come up with the goods then one would wonder why the shares are only 18p, rather than 160p when the company cried wolf over funding in October? But at least that focused minds!

Speaking of falling knives, one of the best risers of the holiday shortened week was Vast Resources (VAST). This company’s newsflow would have baffled Einstein in the recent past, especially with the ongoing threat of a cash call at any time. What was puzzling this week was why there was no fundraise even though the shares were up 67%. Presumably, the broker was still on a skiing holiday, or even better, the company is doing so well it does not need to raise cash? More logically, VAST announced recently that it was in talks to extend repayment of its asset-backed debt facility, so perhaps a positive outcome has leaked out? Perhaps.

A stock which has rather passed me by, rather on the basis that the company name is one that I just plain missed, has been e-commerce play Huddled (HUD). Here the shares have been something of a one way bet since the CEO Martin Higginson buys 2.3 million shares at 2.56p. GBP58,811, to give him a 13.1% stake. The shares ended the week at 3.95p, and I see from X that people who know what they are doing are in the stock too.

But the first signs of recovery during the week were not confined to the biotechs and falling knives. There was even an article in The Times asking, “Are boom times just around the corner for the City?” Indeed, it even added that the great and the good of the City are finally going back to work tomorrow. Well, they are not, as there is a tube strike till Friday.

But I did suggest before Christmas that things have become so bad for the stock market that the powers that be are actually lobbying journalists, in this case Jim Armitage, to try and talk things up. Unfortunately, 20th century journalism does not work in a 21st century market. Nevertheless, let us try to be positive. The Times crack team came up with the following via analysts at Quest, part of Cannacord Genuity. Their favourites are Centrica (CNA) possible for someone looking to buy at the top, Harbour Energy (HBR) already in play, EasyJet (EZJ) same as CNA, Indivior (INDV) actually not a bad idea, Wise (WISE) a really good idea, Drax (DRAX) another good idea, and Balfour Beatty (BBY) always the bridesmaid, never the bride.