Here are three things you need to know today…
1) Very soon…as early as this time next week…
…we are going to break a story that could change your financial future forever.
It’s global in scope.
But it could have specific implications for Australian investors.
That is quite a claim to start today’s Fat Tail Daily.
But stick with me.
Before we give you the full rundown next week, I’d like to talk about a story that broke a few years ago.
The Saudi Aramco IPO.
It was a saga of grand ambitions, mainstream media getting it wrong, royal shenanigans…
…and a few people who saw it all coming getting positioned before it made the frontline news pages.
Do you remember what happened with the share market listing of the world’s biggest oil company?
Here’s a recap…
In 2016, Crown Prince Mohammad bin Salman announced plans to sell 5% of Saudi Aramco.
This was the kingdom’s crown jewel.
His goal was to raise a whopping $100bn.
This would have valued the company at an eye-watering $2 trillion.
The largest IPO in history. By a landslide.
It had been talked about years in advance.
And the road looked bumpy.
Big money investors laughed at the valuation.
The green movement, even back then, said it would be an abomination.
But it happened, on 11 December 2019.
The final valuation ended up at $1.7 trillion.
Short of the $2 trillion dream.
But it ended up that the IPO raised US$26 billion.
Meaning:
This was the biggest new share listing in world history by some margin
Did private investors like you get in on it?
For the most part, no way.
Any chance of getting pre-positioned on that IPO went to Saudi nationals, GCC nationals, and certain foreign residents in Saudi Arabia.
Some international investors could indirectly participate through funds or ETFs with exposure to the Saudi market.
But for most ordinary investors worldwide, the Aramco IPO remained tantalisingly out of reach.
The big guys got to buy second superyachts.
The rest scrambled for the dregs the day after it listed.
Next week, we’re going to be breaking a NEW story for you.
It’s about a NEW ‘Super IPO’ in the making.
Intel that’s just been handed to us shows it could well be going down in LATE MAY THIS YEAR.
No one’s talking about it.
But if what our insider tells us is right, it could be the biggest single-share listing in history.
It could BEAT the IPO value of the previous record-holder, Saudi Aramco.
Why should you care about this?
Well, as I say, there’s an investment move you can make from here in Australia. If you position yourself there…and what we’ve uncovered is true…there may be an opportunity to benefit in the second half of this year.
Now, there are no guarantees here, of course. All investing carries risk. But we believe the setup is there…
That’s what I want to stress today.
This is big. If you’ve got a busy week next week, make sure you set a reminder to read your Fat Tail Daily emails. You won’t regret it!
2) While America has their ‘Magnificent 7’, here in Australia we have the ‘Mundane 7’
That’s how the team at Yarra Capital describe the top four banks and the big iron ore miners.
Quite rightly, too. Following on from yesterday’s email, we saw NAB [ASX:NAB] release their latest trading update. The stock tanked 8%.
There was piddly revenue growth and cash earnings fell 2% for the quarter.
Over at the miners, all three are lowering their dividends because of the falling iron ore price and higher costs.
This is not the recipe for great stock returns.
This is why you simply have to look outside the Top 50 to generate some decent alpha (better than market returns) in Australia.
If you’re happy just receiving dividends, and seeing your capital account not do much, sure, we could at least say that the so-called ASX ‘blue chips’ are at least sturdy.
But you might die of boredom in the meantime too. Yes, the banks have rallied in the last 12 months. But, with the exception of CBA, the other three have done very little since 2015.
That’s where international eyes can be helpful because there’s no home-country bias or misplaced sense of comfort and loyalty.
Here’s the Australian Financial Review reporting yesterday:
‘The world’s largest wealth manager UBS says it is steering clear of Australia’s sharemarket in favour of China, betting that the blistering rally in that country’s technology sector has further to run.
‘That’s because the $US4.1 trillion ($6.5 trillion) investment giant thinks Australian equities are just too expensive given earnings are only expected to increase slightly in the 2025 financial year after contracting 5 per cent in the previous 12 months.’
My colleague Greg Canavan shrewdly spotted the same opportunity, right when the din against China was at its loudest. (Greg’s research is available here.) Contrarianism at its finest!
Closer to home…
You and I have an advantage over the team at UBS. They have trillions they need to allocate.
They need big and liquid stocks to move in and out. We’re smaller, so we can be more flexible in terms of market cap and positioning.
It’s one of, if not the biggest, advantage you have as an individual investor.
Make the most of it!
I’m not saying go wild speculating in biotechs or junior explorers. There are very decent businesses outside the Top 50, run by successful people.
I did a count of my newsletter, Australian Small-Cap Investigator, recommendations recently. At least eight are ‘owner operated’ or have staff heavily invested in the business.
The advantages of this are so compelling that the team over at Wilsons Asset Management are launching an entire fund on the idea.
The Australian reports:
‘The founder-led theme first came on the radar of Wilson as one clear trend kept coming up across his other funds.
‘Founder-led companies were often the stocks generating the bulk of returns, particularly among the small to mid-sized end.
‘Digging deeper showed a broad basket of founder-led companies outperformed the broad S&P/ASX All Ordinaries by 12.5 per cent over the past seven years.’
I go to bed at night sleeping a lot better when I know management has significant skin in the game. You might like to give this angle some thought.
3) We can say there’s one big, shiny, glowing bright spot on the ASX right now. It’s the gold stocks. It was the one sector yesterday that was generally green in good numbers.
Gold remains a barnstorming $4,600 an ounce in Aussie dollars. Gold stocks are hitting 52-week highs still.
It’s not too late to move into this strength. My colleague Brian Chu is the man to guide you. See what he has to say here.
Read on for Murray’s Chart of the Day, below…
Best wishes,
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Callum Newman,
Editor, Small-Cap Systems and Australian Small-Cap Investigator
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Murray’s Chart of the Day
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| Source: Tradingview.com |
With Westpac Banking Corp [ASX:WBC] and National Australia Bank [ASX:NAB] both disappointing the market this week with their results announcements, we have to ask whether the stellar outperformance of banks may be coming to a close.
A great way to judge a sectors performance is to create a chart which divides the sector performance by the ASX.
You can see trends of under and outperformance quite clearly.
The financial sector started outperforming seriously in February 2024 when the chart above flipped into a long-term uptrend.
A period of outperformance from 2012 to 2015 ended up failing at the sell zone of a previous down wave.
The current run has met stiff resistance at the sell zone of the period of underperformance from 2015 to 2020.
Could we see history repeat?
It is early days, but it is certainly something to keep an eye on as we move forward.
Commonwealth Bank [ASX:CBA] is the bellwether of the sector with its crazy vertical chart. So any signs of cracks appearing in their chart from here should be considered as a possible starting gun to a period of underperformance for the sector.
Regards,
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Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps
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