Disclosure: The following represents my opinions only. I am long BKI, CDR, EQX, FM, FWZ, GOT, KNT, LBC, MMA, NICU, NSE, NXE, PTK/POET, PREM, SGML, TAO, TNZ, TRUL, TUK, and VIO (image credit to Didgeman on Pixabay)
If there’s a theme for me in 2025, it’s going to be “focus”. When I look back through the years and think of where most of my big gains have come from, a common theme always emerges. Aside from the Great Oil Re-rate that started in 2021, the big wins have always come from “alpha” ideas, not names that I buy because I like gold, or copper, or uranium, or oil, or whatever, at any given time. As long as I’m in a market that is at least “permissive” in terms of the general level of interest towards stocks, good stories tend to work… and that’s not by accident — it’s because good stories are the ones that represent good value, the building of value, or the potential for value which becomes more apparent to the broader market as business/project/sector milestones are reached. It’s very hard to generate alpha returns without some kind of edge. That edge can come in many different forms, but for me, it usually involves something forgotten, something not broadly followed, something where there’s been a material change (management or project-based), or something where I think I have an advantage due to my prior work/market experience… or some combination of all that. You get the point… if I’m panning for gold, sure, I can go where everyone else is going (market beta), but if I really want to find the good ground, I’ll need to use the experience I’ve got and think about going a little farther afield to capture excess returns (alpha). Not everything will always work out, but if you haven’t heard me say it before, one of my favourite sayings is, “You can only lose 100%”. I say this gladly because in small caps there is often an inherent asymmetry in the upside/downside balance. I might risk losing 100% to make, say, 100-1000%… so then it all comes down to odds. What do I think the odds are of me losing all my money versus making multiples of it? What is baked into the current price? How does that compare to other current or historic companies out there? Will the market care? There is no handbook for that process and to each their own, but the names that I discuss below have all in some way passed my filters. Without question, 2024 was the Year of Tenaz — and now that the crown is up for grabs again in ’25, here are some ideas to think about…