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Here’s what you need to know today

• Drama at Tesla topped the business news headlines yesterday. The day started with the Wall Street Journal reporting that Tesla’s board, led by Australian Robyn Denholm, had engaged a recruitment firm to find Elon Musk’s replacement as CEO. The day ended with the company denying the reports and Denholm defending the board against allegations it is trying to oust Elon Musk. (AFR)
  
  

• Earnings season continued in the US with Meta and Microsoft both reporting positive results. Meta reported $42.3 billion in revenue for the quarter, up 16% year-on-year, and profit of $16.6 billion, up 35%. Microsoft reported $70.1 billion, up 13% year-on-year, and profit of $25.8 billion, up 18%. Despite all the noise, these companies just keep growing. (Forbes)
  
  

• Australian house prices keep rising. For the third consecutive month the Cotality (previously CoreLogic) Home Value Index rose, with every major city recording a rise, and the national index reaching a new record high. (ABC News)
  
  

• Accounts filed by TikTok Australia show the social media giant almost doubled its revenue and tripled its profit in Australia in 2024. TikTok Australia made $679 million in revenue, up from $375 million in 2023, and posted profit of $31 million, up from $11 million in 2023. The company is growing quickly in Australia, with 106 Sydney-based jobs open on their careers website. (AFR)
  
  

• Woolworths has been managing a period of slow growth, with shares up 0.4% over the past 12 months while rival Coles is up 31% in that same time. However, investors in Australia’s largest supermarket got some good news as supermarket sales growth were up 3.6% for the quarter. A key reason for the growth is their Minecraft collectibles promotion. (AFR)
  
  

• WiseTech Global shares jumped 7% after it announced plans to acquire US-listed supply chain software platform e2open for $3.5 billion. This will be co-founder Richard White’s first big move after a number of directors quit earlier this year over allegations about his personal conduct. (AFR)
  
  

• America’s economy shrank at an annual rate of 0.3% in the first quarter of 2025, its first economic contraction in three years. This is a dramatic drop from 2.4% growth in 2024 and was accompanied by the lowest consumer confidence since 1990, private sector job growth slowing to the lowest pace in nine months, and a widening trade deficit (the figure tariffs were meant to reverse) as businesses rush to ship in goods before tariffs raise their cost. (NBC News)
  
  

• China is also feeling the effect of this brewing trade war, reporting the worst contraction in factory activity since December 2023. New export orders fell to the lowest level since December 2022. (Reuters)
  
  

• The latest company to share how Trump’s proposed tariffs will impact their bottom line was heavy equipment maker Caterpillar, that warned tariffs could add up to $350 million in costs each quarter. (ABC News)
  
  

• The US and Ukraine signed a minerals deal. The US will get access to Ukraine’s rare earth minerals and the funds raised will fund reconstruction efforts in Ukraine. Treasury Secretary Scott Bessent said the creation of the fund was a signal to Russia that Trump was “committed to a peace process centred on a free, sovereign, and prosperous Ukraine over the long term”. (Al Jazeera)
  
  

• Pakistan claimed it has credible intelligence that India is poised to launch a military strike in the next two or three days. Tensions have been rising between the two nuclear-armed rivals ever since a gunman killed 26 people in the disputed Kashmir region. India claims Pakistan support the group responsible. (Reuters)

What the…?

We’ve covered China’s demographic challenges in this email before. Earlier this year we covered how 2024 saw the lowest number of marriages since the statistics started being recorded. As Chinese leaders grow increasingly concerned about their inverted population pyramid and a lack of young people to support an ageing population, one town is going to extreme lengths.

In the city of Tianmen in central China, the local government is offering packages up to 280,000 yuan (US$38,000) for parents having children. These packages include housing subsidies and maternity leave. But recognising having a family is more than a financial decision, the city also established a system to promote the career advancement of parents with two or more children.

While early days, Tianmen saw a 17% uptick in birth rates in 2024 after 8 years of decline. (The Economist)

Investing is a lifelong journey

Here’s what you can learn today.

Why Claude Walker loves small caps

This is an excerpt from our conversation with Claude Walker, founder of A Rich Life (Listen on Apple | Spotify)

Question: Small caps are an exciting space for the Equity Mates community, and you've spent a lot of time there. Why are small caps attractive to you?

Claude: Small caps are appealing because having a smaller amount of investment can be advantageous in this space. This advantage persists until you manage around ten million dollars. Since I don’t have that yet, it’s great to focus on small caps.

Bryce: Can you explain why that makes a difference?

Claude: Sure. Many small companies, especially those with management owning a significant portion of shares, can have limited trading volume. For instance, a company valued at around one hundred million dollars might have management holding fifty million dollars of shares. The available shares in the market could be quite low, making it difficult for larger funds to accumulate a meaningful position without impacting the share price. For a fund managing one hundred million dollars, it could take days or months to build even a small position, making them less likely to invest in these companies.

Consequently, many funds avoid these stocks, eliminating a substantial source of capital from competition. If you identify a small, profitable company with a solid business strategy, traditional investors might ignore it due to its size, providing an opportunity for you. Over time, if the company grows and increases its liquidity, it may attract larger investors once it becomes more established.

The optimal scenario occurs when such a company enters the ASX 200. This transition can lead to forced buying from ETFs tracking the index. If the share register remains tight, this can create a liquidity squeeze that drives up the share price, particularly if the company has grown without significant dilution.

When this happens, it’s a good time to consider taking profits or holding on; however, I generally wouldn’t buy at that point since it tends to be a peak moment. Overall, investing in small caps can be very rewarding if you have a solid entry point.

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