Three things I’m thinking about today…
- Watch Electro Optic Systems ($EOS) today…
Here’s the thing about the share market. You never know what’s going to turn up and surprise you.
Case in point is industrial/technology company EOS. It specialises in remote weapons. They just landed a big, juicy contract.
This morning EOS said it has a €31million (A$53m) order out of Europe. You can see that here.
The share price is up 8% in early trade. It will be interesting to see where it ends up by the end of the month, even the year.
Why?
This could be the start of a string of announcements and deals for EOS.
I’m not saying it’s a sure thing.
However…
Governments around the world are pouring money into their defense budgets. Companies like EOS have every chance of winning their share of this.
This is a business that’s gone through a substantial restructuring recently.
They also wanted to focus on the counter drone market – something ripe with opportunity.
I can say this from experience.
Last year, my readers had the chance to double their money in 6 months in fellow counterdrone firm DroneShield ($DRO). It went on a manic surge from around 50 cents to over $2.
The rally went completely over the top, by the end.
DRO, also, hasn’t really delivered a knockout contract to justify that monster run.
I’m not saying it’s achieved nothing. But I thought something bigger might have appeared by now.
It’s a competitive market.
There’s something else about the worldwide defense boom happening now.
- Rare earths – the eternal lure
Years ago, a former publisher of mine made the comment that investors always find rare earth shares compelling.
There’s something about their mystery, their strategic nature and the geopolitics around the whole industry that the market finds almost irresistible.
In 2025, all those reasons are entirely justified.
Here’s financial strategist James Aitken appearing in the Australian Financial Review.
Look at his observation from the article…
“It has been suggested to me that one month ago, heavy rare earth supply chain shortages in the US became critical,” says Aitken.
“By the middle of April, so acute was this shortage that it was starting to impact US surface missile and submarine supply chain dependencies.”
This is a strategic weakness for the USA. It won’t be solved tomorrow, either.
What else can we see going on around this?
There is a small Aussie rare earth developer called Hastings Technology Metals (HAS).
Last week they announced that Twiggy Forrest’s investment house – Wyloo – was sealing a joint venture for their Yangibana rare earth project.
Watch this whole space for further deals, mergers and exploration.
- Speaking of critical minerals…
Did you see this news?
The chairman of CATL – one of China’s leading battery firm – says half of Chinese heavy trucks could be electric by 2028.
That’s huge, if so.
Let’s think of some of the implications.
China has two strategic weaknesses. One is dependence on imports of oil. A second is semiconductors.
The Chinese leadership is addressing both.
One is developing their own semiconductor industry. It’s already enough of a threat for the US to try and block chips from Huawei.
China is also lessening its dependence on oil through developing its massive electric car/battery industry.
A few times last year I said to start watching lithium stocks for a sign of the sector bottoming out.
News on this front is interesting…
We saw Core Lithium (CXO) announce plans to restart their operation in the NT. It’s in care and maintenance from low lithium prices.
We also have a flagbearer for the sector in Pilbara Minerals (PLS).
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| Source: Market Index |
It’s possible the major downtrend here is over and the share price begins to track sideways.
It’s a little too early to say definitively. My suggestion is to start watching how the stock reacts to news from here.
The lithium cycle may be beginning to turn upwards. That could be good news for Aussie investors if so.
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
– US Dollar Index
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| Source: Murray’s chart of the day 8 May |
The chart above is from my chart of the day on Thursday 8 May.
The US Dollar Index [TVC:DXY] was trading around its current level of 100 and I said:
If the US Dollar Index bounces from the current level around 100.00, I would expect it to struggle in that resistance zone and possibly turn back down again to test the recent lows.
If those levels can’t hold I would expect to see the US Dollar Index cascade down towards 93.00 to 96.00 which is the buy zone of a major uptrend between 2021-2022 (See chart above).
Since then the US dollar rallied and hit a high of 101.98 last week before selling off to its current level of 100.7.
It is too early to call that as the high in the short-term rally, but it does show us that my prediction that there should be resistance around 102 may be correct.
The Australian future fund has said it is considering moving capital away from the US as a result of expectations that Trump wants the US dollar to fall as part of his plans to rebalance trade.
They have had an overweight allocation to the US with half of their funds invested there.
If other sovereign wealth funds and investment managers also start adjusting their exposure levels to the US in preparation for an expected weakening in the US dollar it could lead to some serious selling in US dollar assets.
So keep an eye on the US dollar which could be the catalyst for the next wave of selling in US bonds and stocks.
Regards,
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Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps
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