Trump Endorses Cryptos / Capital Flowing to Small-Caps

FRC Top Picks

The following table shows last month’s top five performers among our Top Picks. The top performer, Enterprise Group, was up 17%. Enterprise is an oilfield services company specializing in renting equipment to oil and gas companies. We anticipate the company's Q2 results, due next week, will show record revenue and EPS.

Top Five Weekly Performers	WoW Returns
Enterprise Group, Inc. (E.TO)	16.5%
Giga Metals Corporation (GIGA.V)	10.0%
South Star Battery Metals Corp. (STS.V)	9.3%
Kidoz Inc. (KIDZ.V)	3.2%
Builders Capital Mortgage Corp. (BCF.V)	2.0%
* Past performance is not indicative of future performance (as of July 29, 2024)

Source: FRC

Our top picks have outperformed the benchmark (TSXV) in four out of seven time periods listed below.

Performance by Sector

Total Return	1 Week	1 mo	3 mo	6 mo	1 yr	3 yr	Since launch
Mining	-7.8%	-8.8%	-8.6%	8.3%	-17.8%	-45.2%	2.1%
Cannabis	N/A	N/A	N/A	N/A	N/A	-44.3%	-23.6%
Tech	3.2%	3.2%	-30.4%	60.0%	-38.5%	-32.4%	-4.5%
Special Situations (MIC)	3.7%	-1.8%	10.3%	10.7%	38.1%	-14.2%	-6.5%
Private Companies	N/A	N/A	N/A	N/A	6.7%	20.5%	30.5%
Portfolio (Total)	-5.1%	-6.7%	-7.1%	7.3%	-6.6%	-22.3%	3.7%
Benchmark (Total)	-1.4%	1.2%	-1.2%	3.3%	-8.6%	-38.0%	-35.3%
Portfolio (Annualized)	-	-	-	-	-6.6%	-8.1%	0.3%
Benchmark (Annualized)	-	-	-	-	-8.6%	-14.7%	-4.0%

1. Since the earliest initiating date of companies in the list of Top Picks  (as of July 29, 2024) 2. Green (blue) indicates FRC's picks outperformed (underperformed) the benchmark. 3. Past performance is not indicative of future performance.  4. Our complete list of top picks (updated weekly) can be viewed here: Top Picks List

Market Updates and Insights: Mining

Last week, global equity markets were down 0.8% on average (down 0.9% in the previous week), primarily driven by continued sell-offs in tech and AI stocks. On a positive note, the U.S. inflation data released last Friday were encouraging, raising the possibility of a Fed rate cut in September. We are witnessing a shift of capital from large-cap to small-cap stocks, fueled by increasing expectations of a Fed rate cut. This trend is evident from the 0.2% drop in the S&P 500 last month, while the Russell 2000 surged by 10.1%.

Source: FRC / Various

Last week, metal prices were down 2.7% on average (down 4.1% in the previous week).

Gold producer valuations were down 1.7% last week (down 2.8% in the prior week); base metal producers were up 1.5% last week (down 7.4% in the prior week). On average, gold producer valuations are 16% lower (previously 15%) than the past three instances when gold surpassed US$2k/oz.

		22-Jul-24		29-Jul-24
	Gold Producers	EV / R (forward)	EV / EBITDA (forward)	EV / R (forward)	EV / EBITDA (forward)
1	Barrick	3.13	6.46	3.04	6.25
2	Newmont	3.43	7.77	3.34	7.56
3	Agnico Eagle	4.83	8.80	4.77	8.60
4	AngloGold	2.46	5.66	2.37	5.47
5	Kinross Gold	2.67	5.63	2.62	5.50
6	Gold Fields	2.92	5.55	3.03	5.61
7	Sibanye	0.66	3.66	0.65	3.59
8	Hecla Mining	5.08	13.69	4.94	13.28
9	B2Gold	1.74	3.28	1.71	3.27
10	Alamos	5.27	9.49	5.10	9.43
11	Harmony	1.67	5.09	1.62	4.95
12	Eldorado Gold	2.62	5.20	2.66	5.16
	Average (excl outliers)	2.85	6.05	2.81	5.94
	Min	0.66	3.28	0.65	3.27
	Max	5.27	13.69	5.10	13.28
	Industry (three year average)	110.70	116.70	110.70	116.70
	Base Metal Producers	EV / R (forward)	EV / EBITDA (forward)	EV / R (forward)	EV / EBITDA (forward)
1	BHP Group	2.81	5.38	2.80	5.35
2	Rio Tinto	2.13	4.63	2.14	4.62
3	South32	1.30	5.94	1.28	6.01
4	Glencore	0.43	5.66	0.42	5.50
5	Anglo American	1.82	5.36	1.90	5.60
6	Teck Resources	3.34	7.80	3.58	8.66
7	First Quantum	3.60	12.11	3.55	11.86
	Average (excl outliers)	2.20	6.70	2.24	6.80
	Min	0.43	4.63	0.42	4.62
	Max	3.60	12.11	3.58	11.86

 Source: S&P Capital IQ & FRC

We are maintaining our metal price forecasts.

Market Updates and Insights: Cryptos

Prices of mainstream/popular cryptos were down 1% on average last week (up 3% in the previous week).

July 29, 2024
Cryptos	WoW	YoY
Bitcoin	3%	130%
Binance Coin	0%	137%
Cardano	1%	31%
Ethereum	-1%	76%
Polkadot	-8%	8%
XRP	-3%	-15%
Polygon	-4%	-28%
Solana	2%	635%
Average	-1%	122%
Min	-8%	-28%
Max	3%	635%
Indices
Canadian	WoW	YoY
BTCC	1%	125%
BTCX	2%	142%
EBIT	2%	139%
FBTC	1%	44%
U.S.	WoW	YoY
BITO	1%	52%
BTF	-2%	76%
IBLC	-11%	38%

 Source: FRC/Yahoo Finance

The global MCAP of cryptos is US$2.53T, up 7% MoM, and 106%YoY.

Total Crypto Market Cap Chart

Source: CoinGecko

Last week, BTC was up 3.1%, while the S&P 500 was down 1.7%. The U.S. 10-year treasury yield was down 0.08 pp.

Source: FRC/ Yahoo Finance

The global hash rate of BTC (defined as calculations performed per second/an indicator of network difficulty) is 661 exahashes per second (EH/s), up 9% WoW, and 20% MoM. The increase in hash rates is negative for miners as their efficiency rates (BTC production per EH/s) are inversely linked to global hash rates. 

Total Hash Rate (BTC) 

 

The Realized HODL ratio (RHODL), which gauges the activity of short-term holders relative to long-term holders, was up 28% WoW, and 454% YoY. We interpret the increase in RHODL as a sign of strengthening demand, suggesting potential for an uptick in near-term prices. Historically, BTC prices have moved in tandem with this ratio. By tracking RHODL, we believe we can identify potential turning points in BTC prices.

Source: FRC/ Various

Companies operating in the crypto space are trading at an average EV/R of 6.6x (previously 7.0x).

Source: S&P Capital IQ/FRC

July 29, 2024
Crypto Stocks	EV/Revenue
Argo Blockchain	2.3
BIGG Digital	5.2
Bitcoin Well	0.8
Canaan Inc.	1.3
CleanSpark Inc.	13.0
Coinbase Global	15.2
Galaxy Digital Holdings	N/A
HIVE Digital	4.0
Hut 8 Mining Corp.	8.2
Marathon Digital Holdings	11.8
Riot Platforms	9.0
SATO Technologies	1.5
Average	6.6
Median	5.2
Min	0.8
Max	15.2

  Source: S&P Capital IQ/FRC

Key Developments:

• CSOP Asset Management launched Asia’s first inverse Bitcoin ETF last week, designed to produce returns opposite to Bitcoin’s daily price movements, offering a potential hedging tool for investors. While this is a novel offering in Asia, inverse Bitcoin products, such as the BITI - BetaPro Inverse Bitcoin ETF on the TSX, are already available in other markets.
  
  
• Last week, Donald Trump was the keynote speaker at the Bitcoin Conference 2024 in Nashville. Previously a skeptic of cryptos, Trump voiced his support for the sector during his speech. He promised to implement policies that would provide more stability and fewer regulations, emphasizing the importance of everyone's right to self-custody. While the race between Trump and Harris is tight, Trump holds a slight lead in the polls. We believe a victory for Trump could potentially boost confidence and sentiment in the crypto sector.
  

Market Updates and Insights: Artificial Intelligence/AI 

Major AI indices are down 3% WoW on average (down 2% in the previous week), but up 5% YoY.

July 29, 2024
AI Indices	WoW	YoY
First Trust Nasdaq AI and Robotics ETF	-2%	-9%
Global X Robotics & AI ETF	-3%	9%
Global X AI & Technology ETF	-3%	16%
iShares Robotics and AI Multisector ETF	-2%	-5%
Roundhill Generative AI & Technology ETF	-5%	15%
Average	-3%	5%
Min	-5%	-9%
Max	-2%	16%

Source: FRC/Various

The following table highlights some of the most popular large-cap AI stocks. Shares of these companies are down 7% WoW on average (down 6% in the previous week), but up 77% YoY. Their average P/E is 37.2x (previously 39.3x) vs the NASDAQ-100 Index’s average of 30.9x (previously 31.9x).

AI Stocks	WoW	YoY	P/E
Arista Networks	-6%	108%	44.4
Dell Technologies	-11%	113%	23.2
Microsoft Corporation	-4%	27%	36.9
NVIDIA Corp	-9%	140%	66.0
Micron Technology	-6%	51%	n/a
Palantir Technologies	-5%	36%	n/a
Qualcomm	-7%	36%	24.0
Super Micro Computer (SMCI)	-10%	112%	39.6
Taiwan Semiconductor Manufacturing	-2%	67%	26.0
Average	-7%	77%	37.2
Median	-6%	67%	36.9
Min	-11%	27%	23.2
Max	-2%	140%	66.0

Source: FRC/Various