Here’s what you need to know today

• The biggest story of the day: an apparent assassination attempt on former US President Donald Trump has failed. The alleged assassin fired on Trump while he was playing golf in Florida. The gunman has been taken in to custody and Trump was unharmed.
  
  

• Capital Brief have the reporting on the internal jostling to succeed Mike Sneesby as CEO of Nine Entertainment. Top shareholder Bruce Gordon, who owns more than 25% of the company, is seen as the ultimate kingmaker in the competition for the top job.
  
  

• Conflicts continue to escalate in Ukraine and Israel. In the Ukrainian city of Kharkiv, a Russian guided bomb killed 28 people after hitting an apartment building. Meanwhile in Israel, the Houthis claimed they fired a hypersonic missile that evaded Israel’s air-defence systems.
  
  

• TikTok’s day in court has arrived. The Chinese-owned social media app is fighting the upcoming ban on its product in the US. The app, which currently has 170 million American users, is arguing the law is an infringement on its free speech rights.
  
  

• SpaceX’s Polaris Dawn mission returned safely to Earth after 5 days in orbit and having successfully completed the world’s first private space walk. NASA hailed the mission as a “great leap forward” for the commercial space industry.
  
  

• Last week, Apple announced their AirPods 2 could double as hearing aids. This week, US regulators approved Apple’s hearing aid software update, marking the first time the US government has authorised over-the-counter hearing aid software.
  
  

• OpenAI has confirmed that as part of their latest capital raise (valuing the company at $150 billion), it will remove its existing cap on profits. OpenAI started out as a not-for-profit, then moved to a capped profit model. Now it seems it will operate as a standard, for-profit company.

What the…?

South Korea has the lowest birth rate in the world. As fertility rates fall and pet ownership increases, it has now got to the point where sales of dog strollers have actually overtaken sales of baby strollers. 

Investing is a lifelong journey

Here’s what you can learn today.

This is an excerpt from our conversation with Claude Walker, founder of A Rich Life. You can listen to the full conversation on the Equity Mates Investing podcast (Apple | Spotify)

Bryce: 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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