The economic ship is steady again after being rocked by macroeconomic waves since 2020, but with troubled waters still ahead, experienced fundie Lee laFraté has agreed to share his ‘charts’ for smoother sailing.

“What we are seeing today is the backwash of two years of efforts from central banks and governments to steady the ship,” Armytage Private’s Lee laFraté said ahead of his appearance on Friday’s The Insider: Meet the Fund Manager session.

“But coming out of this environment of low interest rates and money printing, the cost is that interest rates go up because they were down so low previously.”

A worldwide frenzy of interest rate increases this year is testament to this, with companies of all sizes forced to adapt to the conditions, or risk going under, as markets rebalance.

This ‘cleansing’, as Mr laFraté calls it, is a normal aspect of economies and market cycles, and provides investors with a clearer assessment of the strength and suitability of businesses.

“The past 12 months have been horrendous,” Mr laFraté said. “The IPO market, particularly in the small and microcap sector, has been hammered. A lot of businesses are down 80-90%.

“But within that struggling segment will be hidden gems – and, of course, it’s our job at Armytage to identify them.”

Although timing a market recovery is far from an exact science, Mr laFraté suggested the bigger stocks will recover first, followed by the mid-sized and then the smaller ones – “perhaps over a six to 12-month period”.

“We’re starting to scan the list of stocks now that have been hammered to see which ones have an earnings profile and could recover.

“For investors looking to trawl through the labyrinth of failed IPOs and smashed-and-bashed small and microcaps in search of investment opportunities, I’d suggest keeping an eye out for ‘earning stories’, not just ‘storytellers’.

“Stick to the fundamentals. Look for a business with a balance sheet that has cash in it, because going to market and raising capital in this environment is pretty grim.

“The lesson here is to always ask yourself: ‘Can this business get to a position of generating an operating cash flow to pay its bills? And how long will it take?’

“Only invest your money when you can confidently answer that question and are satisfied with the answer. That way, you will avoid a lot of pain and misery.

“But rest assured, there are gold nuggets to be found for investors, if you know where – and how – to look for them.”

Join Armytage Private’s Lee laFraté this Friday, 29th July at 12pm (AEST), on our weekly The Insider: Meet the Fund Manager webcast to hear him talk about his favourite stocks, investment strategy, market insights and more. There will also be an opportunity to ask questions during the session. To book yourself in, click here.

Sources:

• Reach Markets, Note from the MD: RBA under pressure amid global frenzy of rate hikes