Have the Markets Settled? Here’s Where we are Looking

• Commentary: Chaos quietening down? Sectors where we see some good opportunities.

It feels like things are starting to calm down a bit now...

(for the moment)

We have been using the snow globe shake analogy to describe Trump's first ~100 days in office.

And how it affects the small end of the markets where we Invest.

Trump gave things a shake by signing a bunch of Executive Orders to drive new strategic directions for the USA.

... and imposed set of tariffs that surprised everyone with how extreme they were.

Then he rolled many of those tariffs back with a 90 day freeze on everyone except China.

Since then, he has signed multiple deals including with the UK, the UAE...

and even China.

During this period, global markets were knee jerking up and down in response.

For the moment, it seems like everything is settling back to a “new normal”.

...and markets are actually higher in the big end of town then they were before all of the volatility.

With the “shake” somewhat over (for now) and the “snow settling”, it's now a much clearer environment to make some new Investments.

While this volatility has been playing out, we have kept relatively quiet on making new additions to our Portfolio.

We have only added one new company so far in 2025 - RocketBoots (ASX:ROC).

ROC has developed “Vision Artificial Intelligence” technology for giant companies to analyse and respond to in-store customer behaviours.

It combats theft in retail stores and helps to optimise workforce efficiency.

(tariffs or not, optimising efficiency and reducing costs in major retailers and banks will be in demand)

ROC was easy to do amongst all of the recent market chaos because it was, in a way, immune to tariffs...

~$12M capped ROC has ~$35M revenue in their “advanced stage sales pipeline”

Our bet is that if ROC can sign one or more new deals in the near term, it could multiply ROC’s current ~$700k FY24 revenue.

(and hopefully share price too)

Read our ROC launch note here

So what’s next?

Commodity markets, biotechs, gold and US-based companies all have seen significant amounts of volatility in the last few months...

But we think there is enough emerging clarity for now with:

(1) What Trump will do and

(2) How the markets will react

...to start making some more new Investments again.

To make any new Investment requires a certain level of market certainty...

In volatile markets, it's usually easier to just Increase positions in existing Portfolio companies where you believe in them over the long term, as they get indiscriminately sold off in broader market panics.

Now, though, we think it's time to pull the trigger on a few opportunities...

Coming into 2025, we mentioned our strategy was going to be as follows:

(Source)

Post “snow globe shake”, we are still focusing on all of the above, with very minor tweaks to our DD process to adjust for the rocky first part of the year.

Our plan is to make at least three new Portfolio companies before the end of the financial year...

The sectors we are seeing value in the most

Small gold stocks

Gold is trading near all time highs.

Big gold producers are flush with cash.

They are starting to use their excess cash to buy medium sized gold producers...

We think this money paid out to the acquired medium size gold company shareholders will start finding its way to the small gold companies soon...

(We wrote about this in detail here)

Gold has come off its near all time highs over the last ~10 days.

Probably because the cohort betting on continued tariff chaos is winding back their safe haven bets as that particular context settles down.

But what about the USA’s still growing US $36 trillion national debt?

Zooming out, the gold price is still almost US$1,000 per ounce higher than this time last year.

We also think all of the macro reasons to be holding gold have actually become stronger...

1) US debt is still a big problem and wont be fixed without any structural changes - US debt is growing every day. Now it stands at US $36 trillion dollars. The bigger that number gets the more difficult it becomes to hold USD as a reserve asset.

...and there are rumblings of increasing the US “debt ceiling” yet again.

(The “debt ceiling” is a cap set by lawmakers on the amount of money the Treasury can borrow to meet federal spending obligations.)

Some even suggesting to remove the debt ceiling alltogether...

(Source)

Rising government debt creates a tempting situation for governments to devalue their currency (print more money) to help pay it off...

Which makes the gold price go up versus that currency.

Here is a useful article which explains the relationship between US debt and gold:

(Source)

BREAKING NEWS:

The US debt situation has become so serious that ratings agency Moody’s just cut the US credit rating overnight for the first time since the year 1919...

Moody’s decision to downgrade, in their own words was down to:

“the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns”

(Source)

2) The US looks like it wants to devalue the USD to make its domestic manufacturing sector more competitive - we did a deep dive on a potential ‘Mar A-Lago accord’ that could trigger a devaluation overnight...

Read that here: Currency Wars, Commodities, and Small Caps

For a more mainstream news take, here is an article from the ABC:

(Source)

3) Tariffs, sanctions and capital controls mean the world is looking for safety in new assets outside of the US dollar - Chinese capital flows into Gold are actually at record highs right now and the Chinese central bank has been a net buyer for 6 straight months.

(Source)

We think there is still a lot of value in the small end of the gold space.

The big caps are being gobbled up in M&A transactions.

That M&A activity is now moving into mid caps...

Next, we think capital will flow down into juniors.

We did a deep dive on gold M&A last weekend here: An Overview of the Different Types of Capital Raising

Biotechs

Many ASX biotechs have been sold off over the last 12 or so months.

We think this is the market moving out of companies where there is a big binary risk.

(similar to pre-discovery explorers).

Throwing up some interesting opportunities and entry points.

Trump’s post from earlier this week about slashing drug costs and the recent blow up of “biotech superstar” Opthea definitely hasn’t helped...

(Source)

We think all of this is just short term noise and biotech innovation will always be rewarded by the market...

After all, there will always be demand for treating diseases that harm or kill humans.

A biotech success story doesn't just deliver cash returns to shareholders...

It also delivers better health outcomes for patients suffering from real diseases.

We only have to look at how our Investment DXB has performed over the last 12 months in what has otherwise been a pretty rough biotech sector.

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

We have generally had a great run with our biotech Investments and are looking to add a new one soon.

Advanced resource projects

We said this would be an area of focus for us going into 2025.

Projects that are considered “advanced” have tens of millions of dollars spent bringing them to where they are today.

BUT the interesting opportunities are where the market is NOT rewarding this sunk capital and is valuing it at cents on the dollar.

So far this year, we have seen big resource companies make the most of the valuation dislocations by acquiring advanced stage development projects that had been trading at low share prices.

The most recent deal we saw was the Peak Rare Earths offer that came in earlier this week.

Peak ended the day up 170% which shows how big the dislocations are getting.

Another one was Galan Lithium which had a takeover offer rejected by the company's board at 3x its market valuation at the time...

The directors thought a 3x uplift was still too cheap....

A good example of a company with a project like this in our Portfolio has been Canyon Resources (ASX:CAY).

CAY’s project is genuinely big and very advanced (at the Bankable Feasibility Study stage) - the project has a 1 billion tonne bauxite JORC resource with a mine life of over 100 years...

For over 12-18 months, CAY was trading at all time lows until Eagle Eye Asset Management came onto the register in a big way.

Eagle Eye slowly built its position up to 43.61% of the company and did what a private owner would do - underwriting a huge US$124M debt facility AND getting CAY a board seat/cornerstone shareholding in the national rail company.

Check out our latest CAY note here: Port access approved for CAY. Final Investment Decision Next to Build Bauxite Mine

Over that time, CAY’s share price has more than quadrupled, which is what we think the opportunity is in these big advanced assets...

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

We think there are a lot more of these opportunities listed on the ASX and are hoping to add one or two more of these to our Portfolio this year.

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Have a great weekend,

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