Trader’s Café With Zak Mir: The Week In Small Caps February 26

Buy In November 

One of the most famous stock market sayings is “Sell in May”. Actually, even better than this is the one that no one talks about, “buy in November, sell in January.” The reason for the lack of publicity on this rule is largely because it is my rule, and I have not told anyone. Of course, just when the market will hit a low in November, and when to exit in the New Year can be somewhat variable. But we have seen a good example of this since last November, and as U.S. inflation fears return, we see things cooling off as February nears its end this year. So arguably, we have had nearly a month extra of the turn of the year rally.

Indeed, I am reminded with the November- January rule that there are a lot of people commenting on the markets, a lot of gurus and a lot of experts. What interests me in particular, are the ones that write for the mainstream media, who are obviously the most important, and venerable. My tenure in the mainstream media was rather short, from 2000-2002 at Shares Magazine, actually a job I was very proud of, as it was my first salaried gig. 

At that time I had the problem that I had a broking background, and was therefore not deemed a proper journalist. My background, was not and is still not that of a proper journalist, usually someone who climbs up from the Hull Gazette, and then onto the nationals, if they have the correct tenacity. 

Closed Shop

Now 20 years later, I know I will never gain entrance to the mainstream media, I have the wrong politics, the wrong age, and as this article might suggest, the wrong attitude. This is even if I correctly predicted the next day’s FTSE 100 close every day, or called stocks better than Warren Buffett. Journalism remains the most closed of closed shops. 

Ironically, I am operating in a closed shop within a closed shop. The stock market remains a very exclusive place, and unless you are Mensa level talented, or a chat show host level networker you cannot get in if you are not from the right background. Once again though, this only means one works harder. The goal in my case, given what I am doing, is to see the retail investor do as well as possible.

Clearly over the past year, it has been very tough for retail investors, or anyone else to flourish. There have been some free rides. Perhaps shorting the indices in the wake of the Ukraine invasion, buying lithium stocks, or if you can get the borrow, shorting small cap stocks. But even the bears will have found things tricky. The recent record for the FTSE 100 over 8,000 is a case in point. 

Hummingbird

As far as the small caps this week, it was interesting that the main feature in terms of newsflow was that quite a few were reaching inflection points, good ones we hope. For instance, there was the arrival of a strategic investor at Hummingbird Resources (HUM). Here there was the arrival of $15m, not a small amount of cash even these days. The bullishness of such an investor turning up is that they are presumably looking to make a decent turn on their investment. At the same time, this quantum underlines to the market in general that perhaps HUM is sitting on something which could offer a decent return for smaller investors too. 

Cora / Emmerson / Kodal 

We saw this illustrated very well quite recently when Kodal (KOD) announced a big funding event, with the shares nearly doubling. Indeed, Cora Gold (CORA) was a highlight during the week as it raised nearly $20m, and when the dust settles one would expect the shares to gradually start reflecting the value of the Sanankoro Gold Project. One has to say that CEO Bert Monro really pushed things along there. In fact, I am reminded of Emmerson (EML), the Moroccan potash play, where the shares are still hanging below the last $6m strategic investment level at 6p, something which is something of a head-scratcher. 

Tirupati

While we are on the subject of mining stocks, strategic investors are one thing, but actually getting the stuff out of the ground is the big win. At Tirupati Graphite (TGR) there was the white smoke above the Vatican that we have been waiting for: production. The company said that the Sahamamy project in Madagascar is now starting to produce, with an estimated output of 18,000 tonnes per year. On this basis the share price near to 30p, and the market cap of £33m, appear to be on the mean side. However, with the starting gun on production now sounded, there does not seem to be much of an excuse for the bulls to drag their feet.