Lunchtime ASX Small Cap Wrap: Investors are backing ‘megacaps’ to emerge stronger than ever

Investors are betting on cashed up “corporate colossuses” to emerge from the COVID-19 crisis with an increasingly dominant market share, writes the New York Times.

Giants like Microsoft, Apple and Amazon – Wall Street’s most valuable companies – could emerge in an even more dominant position after this particular downturn “because the death rates of small businesses is likely to be even higher”, Thomas Philippon, a professor of finance at New York University, says.

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The difference in investor expectations for large and small companies on Wall Street is stark.

The Nasdaq 100 index — the largest companies in the US — is down 0.6 per cent year to date, while the small cap focused Russell 2000 index is down 22 per cent over the same period.

On the ASX, the difference isn’t so pronounced. The the top 20 companies by market cap (average mean $40.8bn) are down about 18 per cent since the start of the year.

At the other end, the S&P/ASX Emerging Companies Index — which comprises 146 companies with an average (mean) market cap of about $150m — is down 25.5 per cent over the same period.

WINNERS

Here are the best performing ASX small cap stocks at 12pm Wednesday April 29:

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Small graphite producer Bass Metals (ASX:BSM) leads the pack with a +65 per cent gain in morning trade on the back of some positive drilling results.

Gold explorer Dark Horse Resources (ASX:DHR) says it will own 25 per cent of the Las Opeñas project in Argentina following a June 30 payment to the vendor.

A December 2020 payment, which would take Dark Horse to 51 per cent ownership, has been renegotiated so that 50 per cent will be deferred to the end of June 2021.

LOSERS

Here are the worst performing ASX small cap stocks at 12pm Wednesday April 29:

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Kalamazoo Resources (ASX:KZR) hit the skids after a drilling program at the Castlemaine gold project in Victoria didn’t go as planned.

“Whilst the Mustang prospect has generated high-grade gold intersections, subsequent technical review by Kalamazoo concludes that mineralisation in this area does not currently demonstrate sufficient widths or continuity to meet Kalamazoo’s stated target criteria, a minimum of 1 million ounces at >10 g/t,” the company told investors.