Is a Santa Rally Incoming?

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After waking up on Friday morning and (as always) quickly checking to see what happened in global markets overnight...

It made for some grim reading.

A sea of red across the global equities and markets watchlist.

Especially bitcoin, which had taken a pounding for the ages.

(not even going to try to read into why or what that means, we’ll stay in our lane on this one, but there are now a lot of rattled bitcoin holders out there souring the mood at parties)

First thought was that the ASX was NOT going to be pretty when it opened in a few hours.

So it was decided to take a day off from writing, and instead spend the morning playing with my young kid and then catch up with the team for lunch.

(pre-market open writing is best achieved by working from home, so a face to face team catch up is a rare event for us, reserved for quiet/terrible days on the market)

There was no point staring at the screen on what promised to be a dirty red day on our ASX Portfolio and watchlist.

Not red from bad news delivered by any of our stocks, but a collective freakout in global markets where the skittish sentiment would flow and be amplified into the small end of the ASX.

And on several regretful glances during the day, it certainly delivered the anticipated horrors.

“Black Friday sales” had extended from toasters, TV’s and clothing to now include small ASX stocks.

(probably good news for anyone who had been waiting for a pull back to do some buying, nothing had changed fundamentally, only investor emotions had changed on the day)

This (Saturday) morning was a different story however...

US markets bounced back overnight.

So we should be in for a nice Monday rebound.

Key takeaway is, it appears that global (especially US) markets don’t know what they want to do... not sure which way they want to go.

So we will likely see big, glorious green days (like Thursday) followed by painful red days (like Friday) and then followed by green days again (probably Monday?)

We’ll take this whipsawing rollercoaster any day over the barren wasteland of consecutive red or boring neutral days that lasted for years post the 2020 to 2021 lithium bull run.

And going forward, we expect the whipsawing to continue.

At our “the market stinks today so lets meet for lunch instead” team lunch we discussed what the lead up to Christmas might look like for small ASX stocks.

Some took the view that the July to October run that ended just a few weeks ago doesn't leave enough time between now and mid December for the market to properly fire up again before it effectively shuts down for a few weeks over Christmas.

However... our most pessimistic team member (who usually hates everything) predicted a small cap rally into Christmas.

Thesis being, that during the July to October bull run, companies that had been starved of cash for the last 3 years, finally got big cash injections enabling them to “finally do things” (that they had put off for the last few years).

Companies are now cashed up and all the pent up catalysts from the last 3 years of bear market are now able to be delivered inside the next 3-6 months, with the new funding.

Perhaps the most important factor - there are some big winners to talk about over the holiday period...

A couple of rough days on the market this month doesn't take that away.

In summary, enough good stuff happened from July to October to make people want to be in the market again, and many companies now have the money to deliver big news in the near term.

(which is what everyone will be talking about over the holidays)

As always no one knows what will happen and the market always throws a curveball our way...

We hope he is right (and the majority are wrong).

One interesting thing we did notice when assessing the damage at the end of last week was the solid performance (and share price resilience) of some of the quieter stocks in our Portfolio.

Stocks we have been holding for a while, but have been quietly executing on their strategy in the background, with little fanfare or announcements.

Yet somehow managed to end the recent market pull back higher than when they started...

ONE - Our health tech investment has been quiet for a while now, but is up from 17c to 29c in a few weeks, off the back of announcing Michael Dowling joined its board of directors.

Michael is the current CEO Emeritus of Northwell Health - New York’s largest integrated healthcare provider with 21 hospitals, 945+ outpatient facilities, and $19.7 billion annual revenue.

He has has ranked in Modern Healthcare's 100 Most Influential People in Healthcare list for 16 consecutive years, achieving the #1 spot in 2022 - (read more here)

ROC - our AI vision tech Investment has also been relatively quiet this year, but has started to deliver a few announcements that helped push its share price from 11c to 16.5c just this week.

(ROC was one of the rare green finishers in yesterday’s bloodbath)

Here is our summary of ROC’s recent announcements (read it here).

HVY - after adding HVY to our Portfolio at 10c during the depths of the 2023 bear market (remember our tree planting image?) HVY has gone as low as 4.7c, but closed green amidst yesterday’s carnage at 52c, near all time highs.

HVY has been relatively quiet on announcements over the last 12 months, but the company’s decision to raise funds via a non-dilutive “royalty sale agreement” instead of the traditional “periodically issue new shares and options” for funding has seen it maintain a very tight register full of investors that want to be there for the long term, allowing its share price to rise, and rise some more.

Read our HVY Investment Memo here

CND - we knew CND would have a fairly quiet couple of years while we waited for it to do the prep work to drill its offshore oil & gas targets in Peru, with the main excitement starting as drilling got closer.

(our oil & gas exploration strategy of getting in early, way before the stock price starts rising ahead of drilling commencing, but does involve an initial “boring bit”)

CND is capped at around ~$16M and has 3 billion barrels of prospective oil resources and an existing 1 trillion cubic feet of gas discovery... but has been so quiet lately the market hasn't really been paying attention.

CND was one of the rare stocks that finished the week higher than it started after announcing an extension to one of its oil prospects - which could mean that 3BN barrel prospect inventory could get bigger (read our commentary here)

(while oil & gas exploration is on the nose recently, we this it is making a comeback in 2026)

BPM - our WA gold explorer hasn’t actually been all that quiet, but they get an honourable mention today for finishing green on black Friday - at 17c it's now the highest it's been since August 2022.

The market seems to be liking what BPM has been cooking up over the last 6 weeks at its WA gold project that is nearby and on the same geological trend as the 8Moz gold Tropicana gold deposit (read more about what BPM is doing here)

And with drilling at BPMs project about to start, if BPM can hit new 3 year highs on a horror day like yesterday, we are excited to see what it can do on a good day...

Same goes for all of the above stocks.

(honorable mentions also go to HAR and ILA who managed to finish green yesterday)

We definitely notice which of our quieter stocks are resilient (or even up) on days or weeks where the market is broadly selling everything off.

And we look forward to seeing what these kind of stocks can do when they move from “quiet execution phase” to “announcing what they have achieved” phase...

And hopefully doing this into a positive sentiment market.

Have a great weekend,

Next Investors

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