If you’ve been around the market for a while, you’ll recognise the ‘Dogs of the Dow’ strategy I’m channelling here.
The gist is to look at the worst performers in one day with the idea that one or two could rebound strongly in the new year ahead.
The ASX 200 returned about 7% last year. The index always obscures the wide variation across individual stocks.
My sector is the small-cap sector. Here’s an example.
My best-performing recommendation last year was Tuas [ASX:TUA].
It rose more than 150%.
In August, I recommended subscribers buy mortgage lender Resimac [ASX:RMC].
We’re only mildly positive on it as of now.
Frankly, the stock was mired with low volume and lack of interest, as were the other ‘non-banks’.
However, I’m noticing a lot more volume come into the stock in recent trade.
Be aware that is has low liquidity, so it doesn’t take much buying to really pull the price up.
However, I suspect small-cap fund managers are nibbling here. Fellow stocks in the sector AFG, Pepper Money, and Liberty Financial are also modestly rising.
Why so?
Resimac, for one, is an established and profitable lender. Its main division is mortgage lending but it’s also building out its asset finance sector as well.
Non-bank stocks have been carted since 2021. We had rising rates, a property slow down, and even a regulatory headwind.
The big banks were (are) pinching their customers with cash back offers and heavy mortgage discounting.
They were able to do this, in part, thanks to cheap RBA funding firms like RMC don’t have access to.
However, that rolls off mid-year.
We also know property is rising again, car sales are strong, and mortgage growth modest but positive.
