Three things I’m thinking about today…

1) All week we’ve been chatting about bullish signals from the markets.

Every day I see more. Today is no different.

One way you and I can get a read on it all is via Initial Public Offerings (IPOs).

This is new companies coming (“floating” in the financial lingo) on to the share market. It doesn’t take Einstein to see why.

An IPO is owners selling a chunck of their company, or all of it, to public investors.

An investment bank will make this happen. They put together a nice little pitch in a document that includes projections, financials and risks.

Then they flog the thing to anyone with a pulse. They get paid from the money raised. The whole process is a nice earner when things are pumping.

However…

Investors only hand over their money when they feel confident, and it’s happening with a solid backdrop.

The investment bankers won’t try and float a company when sentiment is dire. Better to hold off until things look rosier. You get more money that way.

One of the points I made in 2023 and 2024 was that the IPO market had dropped like a stone – a sign to go the other way.

That’s why the news today sticks out like the proverbial.

The Virgin Australia IPO is now on. It’s been brewing for 2.5 years!

Virgin’s owners are coming to the market with their hand out for $685 million, according to the Fin Review.

I can’t tell you the merits, or otherwise, of buying into Virgin. But it’s another sign the market recovery is ongoing.

2) A little bit more on the IPO market comes from a former investment banker.

The Street Talk column today quotes a guy called Declan Sherman, who now runs a recycling company that just listed. They raised $40 million.

The column quotes him as saying…

““I’d say the IPO window is definitely open….

“If you have something people want to invest in, the market is there. We had bids from the type of small-cap fund managers you really want on your register.”

The phrase “IPO window” reminds me of a speech I did to our Alliance members back in 2023. I talked about the “premiership window” opening up for small caps.

I stole that line from AFL coach Mick Malthouse.

The idea is there’s a window of opportunity when it all comes together.

If 2023 was 9 o’clock for small caps, 2025 is between 10 and 11. 12 would be boom times.

Get on it, I reckon.

3) Granted, one sparrow does not make a spring.

This week we’ve also chatted about buybacks and special dividends happening in a few stocks. Again, these tend to happen in “healthy” markets.

Here’s another bullish signal. This time it’s from the property market.

Two big developers are teaming up to construct a new apartment tower up there on the Gold Coast.

The penthouse alone will be a cool $20 million. The Fin Review says completion is due in late 2027 or the first quarter of 2028.

Again, I don’t know whether buying one of these apartments is a good idea.

It’s the thinking behind the build that we care about.

Clearly, the teams behind this project think that construction and finance costs are either stable, or going down, and they can get this away at a profit. Demand will be there to meet it.

This is not an isolated case.

Lower interest rates make real estate more attractive, and will also show up as higher earnings on the stock market when they feed through to the listed property companies.

The credit cycle is expanding. Bullish indeed!

Best wishes,

Callum Newman,
Editor, Small-Cap Systems and Australian Small-Cap Investigator

Murray’s Chart of the Day –
S&P/ASX Small Ordinaries

By Murray Dawes, Wednesday, 4 June 2025

After such wild swings in the market recently, it has been tough reading the tea leaves because various indicators have been sending conflicting signals.

In that situation you can fall into the trap of confirmation bias.

Technical analysis is useful because once you have set up a method to analyse what’s going on, there are moments when your gut feel meets the concrete reality of the chart. And you must trust the chart.

Small cap stocks have been through a tough time over the past few years. They have underperformed their larger cousins massively and the microcap stocks have been even worse.

The S&P/ASX Small Ordinaries remains 9% below the high reached in 2022.

But when I consider the monthly chart there is a lot to like.

The long-term trend turned up February 2024. We have seen some wild swings since then, but they have all taken place with the long-term uptrend remaining positive.

After the serious scare in April, the rebound has been impressive and last month saw the confirmation of a monthly buy pivot.

We are seeing follow on buying this month and a new high in the current uptrend has just been hit.

In the small cap space, there is really no excuse to be bearish based purely on a reading of the charts.

Of course that may all change quickly if the selling returns and a monthly sell pivot is confirmed in the next few months.

But there is no need to predict things. You have to look at what’s there and accept it.

Until proven otherwise the smaller end of the market looks like it could rally further and may even start outperforming large stocks.

Regards,

Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps