The S&P 500 Index (SP: .INX) rose a modest 0.73% whilst the Nasdaq Composite (NASDAQ: .IXIC) index gained just over 1%. The ASX 200 is making headway in afternoon trade on Wednesday, with Block (ASX: SQ2) shares the biggest gainer, up 8.3%, but still down 41% over the past 12 months. 

The softer-than-expected US inflation print gives the green light to US Federal Reserve chair Jerome Powell to raise interest rates by 50 basis points overnight Wednesday.

The main game in town now for stock market watchers is predicting the terminal interest rate and when the Fed will start cutting interest rates.

Quoted on Bloomberg, Jason Katz, managing director and private wealth adviser at UBS, expects interest rates will stay higher for longer.

If they cut rates in the latter part of next year, that's going to be because they broke things along the way and things are ugly. So it's our view that the terminal rate lands anywhere between 5%-5.25% and remains there for the full calendar year.

Such an outcome would likely continue to put pressure on global stock markets, certainly for the first half of next year. Although the ASX 200 has had a good year, certainly when compared to the double-digit losses widely seen on Wall Street, you'd imagine there would be some comeuppance should US markets continue to fall.

2) Of course, not everyone shares the same views as Jason Katz – the divergence of opinion and thoughts is what makes a market.

"The coming year for investing may turn out to be better than many expect for stocks even though a recession appears likely," pros at Natixis Investment Management said Wednesday on MarketWatch.

"I'm bullish because everybody is bearish," said Jack Janasiewicz, portfolio manager and lead portfolio strategist at Natixis Investment Management Solutions. "The downside is already reflected in the market."

Simple is often best, especially given how hard it is to predict what might happen to the economy, to the consumer, to interest rates, to unemployment, to inflation, and more.

3) Writing in their November monthly update, the Surrey Australian Equities Fund said they "are positive on the outlook for Australian equities over the medium term".

Our view remains that inflation has been materially impacted by supply chain issues and as these normalise and higher interest rates take effect, inflation could ease and with it the recent sharpness of interest rate increases… Should rates increases start to slow and the US 10-year bond yield settles, we are positive on equity valuations.

The fund also notes, when it comes to small-cap stocks, positive recoveries often follow down years. 

In 2022, huge gains in resources stocks have helped offset massive losses in growth stocks, such that the S&P/ASX Small Ordinaries Index (ASX: XSO) is down "only" 19% so far this year. Adopting the simple technique of being bullish because everyone else is bearish, I'd guess a basket of beaten-down small-cap growth stocks will outperform in 2023.

I own more than my fair share of small-cap "dogs of 2022", although thankfully I haven't owned them all year, somewhat limiting my losses. 

Moving into 2023, I'm holding out recovery hopes for these dogs, with their one-year share price performance noted. In alphabetical order…

BlueBet Holdings Ltd (ASX: BBT) – down 73%

Field Solutions Holdings Ltd (ASX: FSG) – down 51%

Marley Spoon (ASX: MMM) – down 81%

Plenti Group Ltd (ASX: PLT) – down 64% 

RPM Automotive Group Ltd (ASX: RPM) – down 44%

Swoop Holdings Ltd (ASX: SWP) – down 77%

Hydration Pharmaceuticals Co Ltd (ASX: HPC) – down 72%

Touch Ventures Ltd (ASX: TVL) – down 64%

It's a motley group of companies, with little in common, apart from the devastating falls experienced by shareholders over the past 12 months.

That said, apart from Touch Ventures, which is an investment vehicle trading at a significant discount to its net asset value, they are all growing quickly, mostly have cash or little to no debt, and are either profitable or trade around break-even.

Here's hoping for a happier 2023 and beyond for these dogs, and to the micro-cap (and fun but risky, so please don't try this at home) portion of my portfolio. I look forward to reporting back on progress come this time next year. 

The post "Bullish because everybody is bearish" – here are 8 dogs of 2022 I'm backing for the win in 2023  appeared first on The Motley Fool Australia.

That tip about Touch Ventures Ltd (ASX: TVL), which came from Cyan Investment Management portfolio manager Dean Fergie, attracted tremendous interest from our readers.

"This stock's gone from a listing price of 40 cents back to, it's currently trading at, 13 cents," Fergie told The Motley Fool last month.

"They have, in net cash, 10 cents per share on their balance sheet."

This week another expert named a different stock in a similar position, which may also pique the interest of keen investors:

'The lines are big and the pizzas are expensive'

Wilson Asset Management senior analyst Shaun Weick rated entertainment venue operator Event Hospitality and Entertainment Ltd (ASX: EVT) as a current buy.

"This stock does provide strong leverage to the [post-COVID] reopening themes," he said in a Wilson video.

"They own a collection of cinema assets in Event, hotel assets in QT and Ridges."

The company also operates the Thredbo ski resort.

"If anyone's seen images of Thredbo recently, the lines are big and the pizzas are expensive."

Current share price giving away the business pretty much for free 

As well as increased business from cooped-up Australians coming out of their shells, Weick's team likes Event shares as a "valuation play".

"If you back out the implied value of the operating businesses at the moment, you're paying roughly two to three times EBITDA — for businesses that we think can earn significantly more coming out of COVID."

But the best feature is that the real estate it owns makes 87% of the current share price.

"They've got $2 billion property assets on the balance sheet — current market cap's $2.3 billion," he said.

"We think this one's a good play in this market."

Coverage is sparse for Event Hospitality and Entertainment. But three out of four analysts surveyed on CMC Markets currently agree with Weick, rating it as a buy.

The company is due to report its financials on 22 August.

The post Buy this ASX share where 87% of its value is real estate: expert appeared first on The Motley Fool Australia.

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Cyan Investment Management portfolio manager Dean Fergie discusses two micro-cap ASX shares he currently loves.

Hottest ASX shares

The Motley Fool: What are the two best stock buys right now?

Dean Fergie: We own shares in a listed investment company (LIC) called Touch Ventures Ltd (ASX: TVL), [which] is an Afterpay-backed investment or venture capital vehicle. 

Obviously, a huge amount of heat has come out of the buy now, pay later sector. Valuations are being crunched, and I think this has hurt this as an investment vehicle. 

MF: Even though Touch Ventures itself doesn't have anything to do with buy now, pay later?

DF: They have a buy now, pay later operation in China, which is kind of a double whammy.

But that equates to about 5% of its value. And they have a newer buy now, pay later business in the UAE, which again maybe has some issues with respect to its ongoing valuation. They've got investments in a logistics business Sendle, open market data platform Basiq, and the like. 

But most importantly, this stock's gone from a listing price of 40 cents back to, it's currently trading at, 13 cents. They have, in net cash, 10 cents per share on their balance sheet. And it was trading at 10.5 only at the end of June. 

So you're literally getting all their investments, which they've paid more than $100 million for, for almost nothing. And so we think that, as a pure value play, it's extraordinarily cheap. It's trading at 50% of its NAV [net asset value]. 

There might be some risk of its NAV, but you're not going to mark down the value of cash on your balance sheet. So we think it's a great opportunity.

MF: Did you buy in during the initial public offering (IPO), did you?

DF: We did, yes, unfortunately.

We also owned shares pre-IPO, which was at 20 cents. So we did see reasonable uplift when it IPOed, but then there's been a lot of, I guess, value destruction on the way down.

MF: Fair enough. What's the other stock you like at the moment?

DF: The other one we quite like, and I think it's a bit topical, is a company called Mighty Craft Ltd (ASX: MCL). So they're a boutique brewer and spirits company. And they're also in a few venues. 

They bought a company called the Adelaide Hills Group just at the start of COVID, so early [2020]. And that sort of equates to its whole market cap at the moment. 

But probably most excitingly, they own 40% of a product called Better Beer, which is pretty much taking the market by storm in Australia. They just signed a distribution deal in New Zealand. They expect they'll do next financial year something like 12 to 14 million litres of beer in this one product alone. 

So it's just got a huge amount of growth and at a very, very tiny valuation. I think the total market cap of Mighty Craft now is about $50 million. So we think, again, it offers incredible value given their ongoing asset base and their products.

MF: The share price has about halved this year, hasn't it?

DF: That's about right. I think it's gone from about 30 to 15 odd [cents].

So it's capped out at about $50 million, which we think is tiny, given the amount of products that they've got under their banner.

The post 'Extraordinarily cheap': The ASX share where 77% of its value is cash appeared first on The Motley Fool Australia.

That's because smaller, rapidly expanding businesses are typically the ones who have taken on debt to fuel their growth.

And when a company borrows funds to operate, investors revise down its valuation as interest rates rise. This is because every dollar of future earnings will cost more to produce.

As such, during frightening times for small cap and growth shares, it could be worthwhile checking out the businesses that have plenty of cash on their books.

This theoretically means rate hikes don't affect their future performance. If anything, it can help them marginally, as they can earn a better return on their cash.

And of course, not needing to do equity raising rounds means existing shareholders don't have their investments diluted.

Small caps with so much cash they gave some back

In a shocking month, small-cap specialist fund Cyan C3G saw almost every stock in its portfolio suffer a freefall in June.

But portfolio managers Dean Fergie and Graeme Carson feel especially comfortable about their holdings that boast useful cash reserves.

In fact, two of those companies actually implemented a share buyback to return some of that excess capital back to investors.

"Touch Ventures Ltd (ASX: TVL) holds almost all of its current market capitalisation in cash — $74 million market cap vs $67 million in cash, plus investment assets valued in May 2022 at over $120 million!" Fergie and Carson said in a memo to clients.

"And, quite prudently, has activated an aggressive share buyback, repurchasing over 1 million shares in June."

Despite this, Touch shares lost 24% in June.

ReadCloud Ltd (ASX: RCL) suffered even more, shaving 29% off its valuation last month.

"Digital textbook company ReadCloud holds $5.4 million on its balance sheet, made a net profit of over $1 million in 1H22 and has also announced a share buy-back."

Price crashes don't make sense

The memo also named three other cashed-up businesses that Cyan is keeping the faith in.

"Other companies that hold significant net cash balances include Alcidion Group Ltd (ASX: ALC) $18 million; Raiz Invest Ltd (ASX: RZI) $19 million; and Vita Group Limited (ASX: VTG) $20 million."

The portfolio managers spoke of their angst in seeing great businesses like Alcidion and Raiz respectively lose 21% and 22% of their valuation last month.

"With Alcidion having a strong balance sheet, significant recurring revenues derived from government and private domestic and international hospitals and health care providers, there are numerous reasons to expect this stock could be a strong performer again in FY23," read the memo.

"With almost 300,000 active and engaged financial customers in Australia, Raiz is generating strong recurring revenues and is likely to garner the interest of a myriad of local financial institutions."

The post 5 small-cap ASX shares sitting on a pile of cash: experts appeared first on The Motley Fool Australia.

Each month you'll see some of your ASX shares plunge in value. During market downturns you might even see your entire portfolio in the red.

But short term movements, experts say, should be ignored. If you invest with a long-term horizon, the more important factor is whether you still have faith in the businesses you own.

It's not just the everyday investor but even the professionals have to make such judgments.

Cyan Investment portfolio manager Dean Fergie was faced with this exact dilemma as he pored over 3 ASX shares in his fund that shockingly underperformed in November:

ASX share that's haemorrhaging value but with 'exceptionally bright' future 

Delivery service platform provider Zoom2u Technologies Ltd (ASX: Z2U) saw its shares plummet 22% last month.

According to Fergie, it underperformed even though the business was showing "strong underlying customer growth and revenue of its courier service".

"It's obviously exceedingly frustrating when stock prices appear to contradict underlying operating performance," he said in a memo to clients.

"But we are also not so naive as to not consider possible underlying issues."

Zoom2U's white-label fleet management software Locate2U was also seeing "impressive expansion", he added.

"We met with MD Steve Orenstein in Sydney last week and remain confident the company's future is exceptionally bright with strong scalability and significant structural tailwinds."

Unfortunately the stock has dropped a further 20% this month, to trade at 34 cents on Tuesday afternoon.

Neither no news or some news convince the market

Shares for healthcare software maker Alcidion Group Ltd (ASX: ALC) sank 12% in November.

No news is apparently bad news, as far as the market is concerned.

"The Alcidion share price has been sliding of late on an apparent lack of news-flow," said Fergie.

"However, this month they have announced the win of their long-awaited $23 million+ government contract along with a significant acquisition in the UK."

Investor patience will be further tested though, as the Alcidion share price has lost another 20% in December.

The market yet to grasp this opportunity

Touch Ventures Ltd (ASX: TVL), which is an investment firm spun-off from Afterpay Ltd (ASX: APT), debuted in September with an initial public offer price of 40 cents a share.

It was about break-even when November started but that month saw a calamitous 17% fall in the share price.

Fergie suspects it's a temporary misunderstanding by the market.

"Touch Ventures traded lower with the market not embracing (for the moment) our analysis of the underlying value of the investment portfolio and the company's significant relationship with Afterpay."

The Cyan team met with Touch Ventures boss Hein Vogel, which did not change its bullish view on this stock.

"Additionally the company conducted an investee company webinar during the month which should improve investor understanding of the company's asset portfolio."

Touch shares have fallen even more this month, to trade at 28 cents on Tuesday afternoon.

The post 3 ASX shares now bargains after a nightmare November appeared first on The Motley Fool Australia.

Shortly after listing at 11am, the Touch Ventures share price eclipsed 74 cents – setting an intraday high.

Investors have taken to Touch Ventures' shares like ducks to water. Perhaps there is some speculation over it following in the successful footsteps of its substantial shareholder, Afterpay. Regardless, it's worth taking a quick look at the path so far for the listed investment company.

Touch Ventures opens up ASX opportunities

Unlike its largest shareholder, Touch Ventures is not directly operating in the buy now, pay later (BNPL) space. In fact, the company isn't operating in any sector directly. Instead, Touch invests in startups both in Australia and internationally.

Specifically, the company tends to invest $10 million to $25 million (sometimes more) in unlisted companies in the retail innovation, consumer, finance, and data segments. Its objective is to invest in such companies during their growth stage.

Essentially, ASX-listed Touch Ventures seeks to find similar businesses to what Afterpay was before its initial public offering (IPO) and capture the upside in its rise to prominence – or at least that's what is hoped for.

Currently, the portfolio of investments consists of 5 companies including Sendle, Happay, PlayTravel, Basiq, and Postpay. Around $75 million has been poured into these various investments. However, the goal is to expand this to 8 to 10 companies in the short to medium term.

Afterpay will maintain a close relationship with Touch Ventures under a collaboration agreement. This means the $35 billion BNPL company will, at its discretion, refer opportunities on and potentially provide expertise to Touch Ventures. The company would be financially motivated to do so, with it holding a 24% stake in the newly debuted company.

What's next?

Touch Ventures now holds $100 million in funds following the successful capital raise from its IPO offer. The company will likely use these funds to invest in its next round of opportunities.

Following its ASX listing, there isn't much of a hint where Touch Ventures plans to invest next. However, the company did take part in a recent funding round held by Refundid. This Aussie startup brings the buy now, pay later model to refunds.

For now, shareholders of Touch Ventures can rejoice in a mighty first day of trade on the ASX. Since peaking this morning, Touch Ventures shares are now trading at 51 cents apiece.

The post Afterpay's Touch Ventures (ASX:TVL) leaps 50% on ASX debut appeared first on The Motley Fool Australia.

Four ASX shares that have not let that hold them back are listed below. Here's why these shares are pushing higher:

Sigma Healthcare Ltd (ASX: SIG)

The Sigma Healthcare share price is up 3% to 62 cents. Investors have been buying this pharmacy chain operator's shares this week after a bidding war broke out between Wesfarmers Ltd (ASX: WES) and Australian Pharmaceutical Industries Ltd (ASX: API). Investors appear to be hoping that Wesfarmers comes back with a higher offer.

Smartgroup Corporation Ltd (ASX: SIQ)

The Smartgroup share price has jumped 18% to $9.29. This morning the fleet management and salary packaging company announced the receipt of a takeover approach of its own. A consortium led by private equity firm TPG Global has tabled an all-cash offer of $10.35 per share. Four weeks of due diligence has been granted.

St Barbara Ltd (ASX: SBM)

The St Barbara share price has stormed 7% higher to $1.36. Investors have been buying gold miners today amid the market volatility. And with the St Barbara share price down materially this year, it has been particularly popular with investors. The S&P/ASX All Ordinaries Gold index is up 2.7% at the time of writing.

Touch Ventures Ltd (ASX: TVL)

The Touch Ventures share price is up 31% to 52.5 cents. This morning the Afterpay Ltd (ASX: APT) spin off completed its IPO with a listing price of 40 cents per share. Touch Ventures is an investment holding company focused on high growth, scalable investment opportunities in Australia and internationally. This includes companies that may benefit from Afterpay's ecosystem.

The post Why Sigma, Smartgroup, St Barbara, & Touch Ventures are pushing higher appeared first on The Motley Fool Australia.

The buy now, pay later provider has been the darling of the local bourse, going from an initial public offer price of $1 per share to $125.67 on Monday afternoon.

In other words, $10,000 invested when it floated in 2016 would now be a tidy $1.26 million.

But now that big US fintech Square Inc (NYSE: SQ) is buying it up for $39 billion, perhaps that explosive chapter of the company's life will come to a close.

However, did you know there is a business that will list on the ASX next week that was spun out of Afterpay?

In fact, Afterpay still holds a 32% stake.

Touch Ventures about to land on the ASX

Shares for a company named Touch Ventures Limited (ASX: TVL) will start general trade on the ASX on 29 September.

The venture capital provider launched in 2019 as AP Ventures as a way for Afterpay to invest in startups.

Cyan portfolio manager Dean Fergie told his clients in a memo that the Afterpay connection couldn't hurt.

"Given the huge investor support of Afterpay — additionally so, after its deal with Square that sent Afterpay's shares 30% higher — another good debut on listing could be expected."

Fergie's fund already has some shares after buying in during a pre-IPO funding round.

What does Touch Ventures do?

Touch Ventures invests in startups, primarily by buying some equity in them.

The firm currently has 5 businesses in its portfolio but is aiming to increase that to 8 to 10 companies after the ASX listing.

Normally only sophisticated and institutional investors have access to startup equity as they're far higher risk than publicly listed stocks.

So the float of Touch Ventures would be a rare way for mum-and-dad investors to get a look into the exciting high-growth startup world.

Perhaps as a sign of its pedigree, Fergie said Touch has 2 buy now, pay later startups on its books: Postpay, which operates in the UAE, and Happay, which is a Chinese fintech. 

"Most significantly, Touch Ventures Limited invested US$25m into Australia Post competitor Sendle which has made significant inroads in Australia and is looking to expand into the US." 

The portfolio also includes PlayTravel which is arguably another buy now, pay later system. That business allows customers to pay for travel packages in instalments.

The 5th startup in the portfolio is Basiq, a financial data mining platform.

Touch Ventures chair Michael Jefferies said in the prospectus that no geographic zones or sectors are off-limits in the investment strategy.

"Touch Ventures has a preference for global ventures. All companies in the foundation portfolio are generating revenues but are not profitable at this stage."

The prospectus also mentions that Afterpay could refer investment opportunities onto Touch Ventures.

"Afterpay may also provide specific expertise along with Touch Ventures' expertise in assessing opportunities referred to Touch Ventures and may separately enter into commercial agreements with companies that Touch Ventures decides to invest in," said Jefferies.

The IPO, which issued shares at 40 cents apiece to raise $100 million, has now closed. Touch Ventures shares will start normal trading on the ASX on the morning of 29 September.

Afterpay will then hold 23.3% of the total fully diluted stock.

The post This Afterpay-backed company is listing on ASX next week appeared first on The Motley Fool Australia.