Smallcap Discoveries: Weekly Update: June 12

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Subject: Smallcap Discoveries: Weekly Update: June 12 - 16

June 12 - 16

Market Commentary

Markets

Happy Father’s Day to all the dads out there. This weekly update will be a short one. I spent a lot of time with my kids this weekend.

Equity markets moved higher this week as investors appear to believe that the global economic slowdown will bring about easing monetary conditions and lower interest rates. The DOW was higher by 1.2% while Nasdaq climbed 3.2% and the TSX moved up 0.4%.

Nasdaq is firmly in new 52 week high territory. The DOW is very close to a new 52 week high as well.

Financials

The US dollar index has softened in the past few weeks and seems to be signalling an increase in risk appetite.

It’s hard to imagine we would be seeing a new 52 week high on Nasdaq and a weakening US dollar when interest rates continue to creep higher. We live in strange financial times…

I’ve been keeping a closer eye on the Canadian dollar lately. With the Fed keeping rates steady and the Bank of Canada raising rates I’m not surprised to see the Canadian dollar gain some against the US dollar. The “Loonie” is trading at its highest level against the US greenback in over 9 months. A stronger dollar is welcome news to the inflation fighters as it makes imported goods a bit cheaper but it’s a drag for Canadian exporters as it makes their products a little less competitive on the world stage.

Commodities

Oil prices continues to fight global economic weakness. While oil is up slightly on the week, demand continues to look frail, and OPEC is trying to maintain a floor on prices while non-OPEC producers have been increasing production. WTI oil closed the week at $71.16 a barrel.

According to Baker Hughes, there were 8 less drill rigs active in the US last week and 23 additional rigs active in Canada.

Gold had another flat week closing on Friday at $1968.

Stocks

While Nasdaq continues to be led by large tech, mostly driven by the ongoing artificial intelligence excitement there is less obvious leadership in Canada. Invidia (NVDA) hit another new all time high on Friday dragging up other tech names with it.

In the smaller names, a few of our watch list names that have been trading to new 52 week highs are Thermal Energy (TMG.V), H2O Innovations (HEO.T) and “Cheapies with a Chance” and “Takeover Candidate” IBEX Technologies (IBT.V). It’s a stock that constantly shows up on our cheap lists through out the years. Since our initial listing of IBT.V in 2016 at $0.11, the stock is up a spectacular 818%. IBT.V traded as high as $1.14 this week before settling back at $1.01 to close on Friday.

It is getting very close to making our “10 Bagger” list soon!

Other Stuff

Equity markets feel a little stretched to me right now and while I try not to worry too much about the big markets and the macro environment it just feels like we’ll get a chance at some of our favorite stocks at prices a bit lower than current levels. I’m happy to sit on a bit of cash right now and just patiently wait for some better buying opportunities.

There are a couple of new names we are reviewing but nothing that gets us too excited right now. We’ll keep looking….

This week I’m reading: Good to Great – Why Some Companies Make the Leap…. and Others Don’t – Jim Collins – Great book. Opens my eyes and mind to new ideas and things to look for in management teams. I highly recommend this book.

To your wealth,

Paul and Trevor

Buys and Sells This Week