Market Highlights: Big Tech rally, buying stocks with large cash piles, and small caps to watch today

ASX to rise on Monday after a rally on Wall Street
Microsoft is at all-time highs once again
Betashares launched an ETF focusing on companies with large free cash flows

Aussie shares are poised to open higher on Monday on the back of a Wall Street rally. At 8am AEDT, the ASX 200 index futures was pointing up by +0.3%.

On Friday, the S&P 500 rose by +1.56%, the blue chips Dow Jones index was up by +1.15%, and the tech-heavy Nasdaq surged by +2.05%.

Microsoft jumped 2.5% and reset another all-time high. The stock has been rising 13% in the past month, buoyed by the company’s recent quarterly results which showed better-than-expected growth at its Azure cloud unit.

Other megacap stocks also rose, with Nvidia up 3%, and Meta by 2.5%.

The biggest mover was Nasdaq-listed Plug Power, which  plummeted more than 30% after warning that there is “substantial doubt about the company’s ability to continue as a going concern.” Plug Power provides fuel cells for industrial EVs.

Gains on Friday came despite fresh data showing the American consumer feels worse about the state of the US economy, as consumer sentiment fell for a fourth straight month in November.

Looking ahead, the all-crucial October US inflation report is due tomorrow (US time). Economists have forecast a continued overall decline in inflation, led largely by easing energy prices.

Back home in Australia, the focus will be on October’s jobs report on Thursday, with most analysts already penciling in an unchanged unemployment rate at 3.6%.

Buying stocks with large free cash flows

In its last update, Berkshire Hathaway reported that its cash pile has scaled a fresh record at $US157.2 billion as the company struggled to find those big-ticket deals that Warren Buffett is renowned for.

But Berskshire’s huge cash position has turned investors’ focus on the importance of free cash flow.

Free cash flow is the cash a company generates from its business operations after considering working capital needs and capital expenditures.

It is an important barometer of the health of a company and determines its ability to pay dividends, buy back shares or fund expansion plans.

According to Betashares, there is a body of evidence that suggests a strong association between free cash flow generation and sharemarket performance, as well as persistence.

“Companies with a strong free cash flow have historically tended to outperform broad global equity benchmarks over the medium to long term,” said the fund manager.

Betashares has just announced the launch of the Global Cash Flow Kings ETF (CFLO) on the ASX, a fund which aims to track an index providing exposure to companies that demonstrate strong and consistent free cash flow generation.

Some of the top holdings in the new fund are expected to include well known global names such as Microsoft, Visa and Adobe.

Betashares CEO, Alex Vynokur, said “Cash flow is a measure that is often used by investors and analysts as an indicator of a company’s overall financial health and performance prospects.

“We believe that investing with a focus on cash flow is an intelligent approach offering the potential for outperformance versus traditional broad global equity benchmarks over time.”

In other markets …

Gold price fell almost -1.03% to US$1,938.09 an ounce.

The benchmark US 10-year treasury yield was flattish.

Oil prices gained +2%, with Brent trading at US$81.63 a barrel.

Iron ore futures gained 0.2% to US$128.07 a tonne.

The Aussie dollar was down -0.2% to US63.58c.

Meanwhile, Bitcoin jumped +0.5% in the last 24 hours to US$37,189. Bitcoin’s price has now doubled since FTX collapsed a year ago.

5 ASX small caps to watch today

Qmines (ASX:QML)
Drilling at Artillery Road has intersected broad copper and zinc skarn mineralisation up to 1.0% Cu and 5.1% Zn. Significant intersections include: 23m @ 0.56% CuEq from 205m. The Artillery Road Prospect is a newly discovered regional target that forms part of the company’s flagship Mt Chalmers Copper and Gold Project, located 17km northeast of Rockhampton, Queensland.

Neometals (ASX:NMT)
Visual spodumene has been identified in pegmatite intercepts from historic diamond drill core at 100% owned Spargos Project covering 55sqkm of the prolific Ida Fault. A review of reverse circulation and diamond drill core from historical nickel exploration supports the potential for multiple stacked pegmatite intrusions. Re-sampling is in progress and assays are expected in Q4.

ECS Botanics (ASX:ECS)
ECS is launching a range of GMP-certified cannabidiol (CBD) and tetrahydrocannabinol (THC) pastilles and THC vapes. The pastilles are available in both CBD and THC forms, as well as combinations of both. The white label range is sugar-free, plant-based, and is offered in a range of flavours and colours. Pastilles are chewed and dissolved in the mouth, enabling the active ingredients to rapidly enter the bloodstream.

Skyfii (ASX:SKF)
Skyfii has been appointed to provide its queue and passenger flow management solution to Abu Dhabi International Airport, Terminal A, in the UAE. The deal was secured via a partnership with Next50. The contract is for an initial three-year period, and has a total contract value in excess of $5m which includes implementation revenue and ongoing recurring revenue over the term.

Golden Deeps (ASX:GED)
Diamond drilling at the Nosib polymetallic prospect in Namibia’s Otavi Mountain Land Copper Belt has produced an intersection of critical elements and rare metals from surface, including high grades of copper (Cu), vanadium (V2O5) and lead (Pb) as well as molybdenum, (Mo), antimony (Sb), gallium (Ga) and rare earth elements (REEs). Best result includes: 71.5m @ 3.0% CuEq* (1.0% Cu, 0.25% V2O5, 3.1% Pb, 8.4g/t Sb, 434g/t Mo) & 83g/t TREO from 0m.

The post Market Highlights: Big Tech rally, buying stocks with large cash piles, and small caps to watch today appeared first on Stockhead.