Three things you need to know today…
1. Put DRO, EOS, ASB on your watchlist today.
These are three small cap stocks with a brighter outlook than before.
Why?
The Australian Financial Review reports that Peter Dutton’s latest move is to juice Australian defence spending. I doubt Albanese will squib on this, either, if he wins.
This follows on from the $1 trillion due to come out of the US, plus Germany going big on this front too.
For Australia, this could be an extra $21 billion flowing from taxpayers …but to where?
DroneShield, EOS Systems and Austal are all ASX listed military contractors. They have as good a chance as any of winning contracts here. Let me share something with you.
There’s a financial writer in the USA called Richard Maybury. He’s been recommending military related shares to his subscribers for 30 years.
The gains are astronomical. That’s because the US government has lavished money across the American military for three decades.
Others are now catching on to this simple strategy. Governments make war…and spend big to make it happen.
As it happens…
DRO released their quarterly numbers yesterday.
The market gave it a pass too. DRO is one of the few companies that’s trading higher than before ‘Liberation day’ crunched the ASX.
DroneShield has a market cap of $1 billion.
What did they say?
Revenue was $33 million for the quarter.
That’s the highest quarterly number in company history. They are well on track for their biggest year with committed orders closed to $100 million. There could be more to come too.
They have nearly $200 million in cash after a big capital raise last year. That’s more than enough to fund them for the meantime.
The catch is DRO doesn’t make big money.
Analysts project it making a modest $20 million in profit for 2026. That puts it on a Price to Earnings ratio of about 50.
That’s pretty rich. DRO sells hardware too – not famous for great margins. This is not to say DRO can’t go higher. It went on a huge, mad run last year.
However, it’s extremely dependent on a continual flow of contract wins. If they don’t materialise, the share could wither away badly.
That said, we know governments are showering the world in dollars for defence spending. So DRO has a chance, as do Austal and EOS to capture a good chunk of it. Three to watch indeed.
2. Congratulations to my colleague Brian Chu.
Brian was steadfast in his stance that gold stocks were great buying all last year.
Anyone who followed his lead in his advisory The Australian Gold Report are reaping a staggering return.
The average gain across the portfolio is 153%.
That’s the power of a commodity bull market at work.
The catch is you had to have the guts to back gold when it wasn’t obviously a great buy. Everything is easy in hindsight.
It’s fair to say it’s all come together for gold and gold stocks.
Cost inflation is falling but geopolitical tension is up. The US dollar is getting dumped. There’s safe haven buying and speculators galore.
Either way, way to go Brian!
3. Don’t forget “digital gold”!
Here’s something to pay attention to. Bitcoin in recent years has correlated with the NASDAQ. You can bundle them up as risk on/tech plays.
Lately, the Nasdaq is getting knocked around, but bitcoin is up for the month.
The parlance for this in markets is “divergence”.
It doesn’t seem a coincidence that this happening as gold rips up. That suggests bitcoin is trading, in part, like “digital gold”.
Bitcoin is a fascinating asset because it embodies both risk on / risk off elements.
That gives it multiple ways to pay off over time.
I told you yesterday my colleague James Altucher is looking to surf this wave higher as it builds.
This Thursday, at 2pm Melbourne and Sydney time, he is unleashing Project: Kill Bill.
Curious? Make sure you get on the priority list to see how the crypto market can potentially serve your wealth building this year.
As you can see with Brian’s recent results, when a market goes, it can really go.
Best wishes,
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Callum Newman,
Editor, Small-Cap Systems and Australian Small-Cap Investigator
Murray’s Chart of the Day
– Copper Daily Chart
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| Source: Tradingview |
We have experienced a wild ride recently and the volatility is set to continue while so much uncertainty remains.
Remaining open minded and observant as prices fly around is necessary.
We can receive hints about the underlying strength of various markets as we see them react to huge volatility.
One such market that I have my eye on is copper.
It is one of the strongest commodities over the long-term and was testing its all-time high less than a month ago.
The tariff tantrum saw copper plunge 25% in less than two weeks. That is an unheard of level of volatility for a commodity with such a deep market worldwide.
Fast forward two weeks and copper has had an incredible bounce which saw its price go from US$4.03/lb to the current level of US$4.93/lb. That is just 9% below the all-time high at US$5.37.
I will be interested to see how copper performs around the sell-zone of the wave created by the 25% correction (US$5.04-5.20/lb).
If copper jumps through that resistance we may be close to a serious breakout to new all-time highs.
Regards,
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Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps
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