InvestMacro

Source: Streetwise Reports  (8/8/23)

News Update The U.S. Defense Logistics Agency (DLA) is buying 172 drones for US$2.6 million from this company, which one analyst says builds “best-in-class” unmanned aircraft systems.

Red Cat Holdings Inc. (RCAT:NASDAQ) announced that the U.S. Defense Logistics Agency (DLA) is buying 172 Teal 2 drones for US$2.6 million from subsidiary Teal Drones.

The order was requested by the U.S. Air Force Security Forces for defending bases and installations and was sourced by global operations support company Noble Supply & Logistics LLC.

The Teal 2, designed as a leading unmanned aircraft system (UAS) for night operations, has been approved through the U.S. Department of Defense and is equipped with advanced high-resolution thermal imaging.

“The Teal 2’s industry-leading night-vision capabilities will be a strong asset in helping the Air Force to secure airfields and bases after dark,” said Red Cat Chief Executive Officer Jeff Thompson.

“Looking forward, ThinkEquity expects Red Cat’s revenue and operating income to increase,” ThinkEquity analyst Ashok Kumar wrote in March. “The investment bank estimates revenue will reach US$11.9 million in FY23 and then more than triple to US$37 million in FY24.”

Puerto-Rican-based Red Cat has deployed 200 new high-speed drones on behalf of Ukraine and is also in an ongoing US$90 million deal to provide drones for the U.S. Customs and Border Patrol (CBP).

Drone technology is changing military dynamics worldwide. The Ukraine conflict has raised awareness of their capabilities on the battlefield and has increased defense spending in the West.

The company’s increased entrenchment within U.S. military complex bodes well for additional large contract awards going forward, especially the SSR Tranche 2 program that is expected to be worth over US$300 million and awarded within 12 months.

“Looking forward, ThinkEquity expects Red Cat’s revenue and operating income to increase,” ThinkEquity analyst Ashok Kumar wrote in March. “The investment bank estimates revenue will reach US$11.9 million in FY23 and then more than triple to US$37 million in FY24.”

The Catalyst: A ‘Best-in-Class’ Drone

The firm finished building out its state-of-the-art facility in Salt Lake City, Utah, and invested in raw materials, drones in production, analyst Kumar wrote. This “should support strong sales over 2023,” he wrote.

“Revenue drivers include the infrastructure opportunity, current and future contracts with the [U.S.] Border Patrol and the Short Range Reconnaissance program,” Kumar explained.

“It is thought very likely that it will do so before much longer, and this being so, the stock is believed to be at another favorable buy spot right now,” Technical Analyst Clive Maund wrote on July 27, and said he was staying long, and he “regarded it as a very good point to add positions.”

“Red Cat’s current inventory of chips is big enough to build thousands of drones, and the company has the capacity to manufacture this many in a month,” Kumar wrote. “Now, with a developed and trained salesforce in place, Red Cat is continuing to build its sales pipeline.”

The company’s drone is “best-in-class,” he wrote, and it is getting positive responses from the military and first responders, its target market.

Red Cat “should benefit from new and repeat orders over calendar 2023,” he noted.

Technical Analyst Clive Maund said the stock “continues to have the prospect of winning some very big orders for its drones.”

“It is thought very likely that it will do so before much longer, and this being so, the stock is believed to be at another favorable buy spot right now,” he wrote on July 27.

Maund said he was staying long, and he “regarded it as a very good point to add positions.”

“It’s worth keeping in mind the strongly bullish implications of the big high-volume rally in the middle of June because it could very well make such a move again, which is a growing probability given the strong Accumulation line and the way that moving averages are swinging into positive alignment with a bullish moving average cross pending — so next time it makes such a move more of the gains are likely to stick,” Maund wrote.

High-End Thermal Imaging in Small Form Factor

The Teal 2 is equipped with Teledyne FLIR’s new Hadron 640R sensor, providing end-users with the highest resolution thermal imaging in a small form factor. Other technology partners in the Teal 2 project include Athena AI, Reveal Technology, and Tomahawk Robotics.

It’s not just on the battlefield that the drones are shining. Red Cat has signed on to provide two drones to the Bureau of Land Management for resource management and fire control coordination roles. That authorization includes another prospective 14 purchases in the future.

Red Cat’s Skypersonic division uses the company’s drones to examine difficult or dangerous-to-reach infrastructure. It should benefit from the US$1 trillion U.S. Federal Infrastructure Bill passed in 2021 that will create demand for drone inspection services across many civil improvement projects, including roads, bridges, and towers.

The company may also benefit from the United States’ announcement of a US$300 million arms package for Ukraine, which includes air defense systems.

Ownership and Share Structure

According to Red Cat, 37.27% of the stock is held by management and insiders. Reuters notes that CEO Thompson owns 22.13%. CEO of Fat Shark RC Vision Systems Gregory Ralph French has 8.67%. COO Allan Thomas Evans has 2.41%. Director Nicholas Liuzza has 1.76%. CFO Joseph Hernon has 0.47%, and CEO of Teal Drones George Matus has 0.58%.

Institutional investors have 9.01%. The Vanguard Group Inc. has 2.3%. Pelion Venture Partners has 1.62%. BlackRock Institutional Trust has 0.61%, and Geode Capital Management LLC has 0.49%.

The rest is in retail.

Red Cat Holdings has a market cap of US$53.59 million, with 55.54 million shares outstanding, and trades in a 52-week range of US$2.65 and US$0.7676.

Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Red Cat Holdings Inc.
2. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
3. The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

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By ForexTime 

Astute traders would have noticed some interesting price action on the NQ100_m of late.

After breaking out of an ascending triangle which was in formed from 9th June to 11th July ( 23 trading days), current price action sees NQ100_m bouncing off the support area of a bullish flag.

A flag is a short channel that usually slopes in the opposite direction of a trend, and is usually a continuation pattern.

This support area coincides with the former ascending triangle resistance, which is now support.

Worthy of note is the fact that this support area (former ascending triangle resistance) has held the fort since the 3rd of August.

Interestingly, yesterday’s price action also saw the 50-day SMA on the daily chart act as a dynamic support with a rejection of price at the 15151.3 low to close within the flag pattern.

From a fundamental perspective …

Tomorrow’s (Thursday, August 10th) US inflation report could be a major catalyst for NQ100_m’s next big move!

Inflation is typically measured by the consumer price index (CPI), which measures the change over time in the prices paid by consumers for a basket of goods and services.

The upcoming print is expected to show that both headline and core CPI rose by 0.2% in July 2023 compared to June 2023 (month-on-month). This would match June’s 0.2% month-on-month readings as well.

However, for the year-on-year figures (July 2023 vs. July 2022), this is where the action may stem from.

The headline CPI is expected to tick back higher to 3.3%, versus June’s 3% year-on-year number.

Meanwhile, the core CPI (which excludes more volatile food and energy prices) is expected to moderate slightly down to 4.7% from June’s 4.8%.

Looking further out to Friday, August 11th, the measures of consumer inflation expectations over the next 1-10 years could also influence markets.

Ultimately, if these CPI prints come in well below market expectations, this should signal that the Fed’s rate hikes are having the desired effect, and should further dampen any notion of additional rate hikes for the remainder of the year.

The narrative above should see NQ100_m’s prices rally to test and possibly break the flag resistance. (see above chart)

If the flag’s resistance is breached, the measured move objective would be the distance of the flagpole which is more than 10,000 points (measuring from 10th Julys low of 14933.8 to 19th, Julys high of 15947.7)

A strong upside breakout may even push this tech-heavy index back closer to the psychologically-important 16,000 mark.

On the other hand, bears are set to look out for a set of stronger-than-expected CPI prints for the NQ100_m to test and possibly break the flag’s support.

This would mean the past ascending triangles resistance, which is now acting as support at 15270, would have to give way first.

After that, bears will be targeting the crucial support lines seen at its 50-day SMA as well as the lower bound of this current “flag”.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By George Prior 

Savvy investors around the world are using the ‘summer markets’ period to consider rebalancing their portfolios and, speaking in a recent social media post, the CEO and founder of one of the world’s largest independent financial advisory organizations said this summer he’s investing in three key areas.

deVere Group’s Nigel Green, specifically, said he is increasing his investment exposure to semiconductors, energy, and Bitcoin.

He explains: “Many investors reduce their market activity during this summer, which leads to lower trading volumes and less liquidity, and this in turn traditionally creates price inefficiencies and increased volatility.

“When used effectively and efficiently, volatility can be an extremely powerful investment tool as you can enhance your portfolios with high quality assets at lower entry points.

“This year, the volatility could be heighted following a wave of central bank decisions last week which could suggest that a new era for monetary policy is on its way.”

Nigel Green continues: “Semiconductors are the building blocks of modern tech. They power a wide range of devices and applications, including smartphones, computers, automotive electronics, data centres, artificial intelligence (AI), Internet of Things (IoT) devices, and much more.

“As the world becomes ever-more digitalised and interconnected, the demand for semiconductor components will grow exponentially.

“In addition, due to the growing need for them, there’s a global race by governments for more advanced semiconductors and quicker and more resilient supply chains. As such, there will be a raft of substantial support packages to the industry.”

The second area which the deVere CEO is actively increasing exposure to this summer is energy.

He says: “Investors are largely ignoring energy and prices are lower than almost any other sector – so already a huge advantage.

“I’m piling in now as I believe that as interest rates peak and the global economy turns a corner, which could be within a year or so, demand for energy will soar.”

Bitcoin, the world’s largest cryptocurrency, is the third major asset class of interest for Nigel Green, currently.

“Not only does Bitcoin remain one of the best performing asset classes of the decade, I believe its performance will further strengthen. Both institutional and retail investors are increasingly seeing the value of a digital, global, borderless and tamper-proof currency and store of value.

“This trend will increase as adoption picks up further and as confidence grows again in the global economy.”

As ever, the deVere CEO stresses the importance of diversification.  “While these three asset classes are catching my eye, my main focus is always diversification.

“There remains one clear way for investors to maximise returns relative to risk: the time-honoured practice of portfolio diversification.

“A considered mix of asset classes, sectors, regions and currencies offers protection from market shocks. A good fund manager will help investors capitalise on the opportunities that volatility brings and sidestep potential risks as and when they are presented.”

He concludes: “The investment adage ‘Sell in May and go away’, is a myth.

“The so-called ‘Summer Swoon’ is an important period for investors who are serious about building wealth for the long-term.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

The stock market actions of corporate insiders is revealing

By Elliott Wave International

It stands to reason that executives of a corporation know more about the goings-on of their business than outsiders.

So, it’s wise to pay attention to their stock market actions regarding their own shares.

Yes, the stock market has been rising. As I write, the Dow Industrials is up for the eighth day in a row.

However, trends can turn on a dime, and if the action of insiders is a clue, that turn may be arriving sooner than many stock market participants anticipate.

Here are just a few Yahoo! Finance headlines from the past few weeks:

• American Express Insiders Sold US$9.9m Of Shares Suggesting Hesitancy (July 17)
• Possible Bearish Signals with Lockheed Martin Insiders Disposing Stock (July 12)
• International Business Machines Insiders Sell US$5.6m Of Stock, Possibly Signaling Caution (July 4)

These are by no means all the corporations where insiders have been selling company shares. I just picked out three well-known names as examples.

The July Elliott Wave Financial Forecast, a monthly publication which covers major U.S. financial markets, discussed corporate insider selling and said:

Insiders may sell for various reasons, but one of them isn’t that they believe their firm’s share price is going higher.

That doesn’t mean that insiders are always right or that their market timing is perfect, but as the July Elliott Wave Financial Forecast also notes, it’s best not to ignore the actions of insiders. The publication also showed this chart and added:

There is one group of investors that is selling shares: insiders. … When insider block sales surged in the early months of [a big down wave], the August 2000 Elliott Wave Financial Forecast noted, “Insiders want out.” As the bear market of 2000-2009 illustrated, when insiders sell, it’s best not to pooh-pooh their stance.

In addition to the Insider Transaction Ratio, also pay close attention to the stock market’s Elliott wave structure.

If you’re unfamiliar with Elliott wave analysis, or simply need a refresher, here’s a quote from the Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter:

The primary value of the Wave Principle is that it provides a context for market analysis. This context provides both a basis for disciplined thinking and a perspective on the market’s general position and outlook. At times, its accuracy in identifying, and even anticipating, changes in direction is almost unbelievable.

Enjoy free access to the online version of Elliott Wave Principle: Key to Market Behavior by becoming a member of Club EWI, the world’s largest Elliott wave educational community. Club EWI is free to join and allows you complimentary access to a wealth of Elliott wave resources on investing and trading.

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