Precision Points: As liquidity flies, don’t chase a hot market to the last derivative

A slew of capital raisings late in 2025 show retail punters are back, but Precision’s Dermot Woods and Andy Clayton say quality is still key.

Even in a hot market, Dermot Woods and Andy Clayton like to look for a 'first derivative' stock. Pic: Supplied/Stockhead

In Precision Points, Precision Funds Management executive directors Dermot Woods and Andy Clayton draw on insights from two decades on the front lines of equity markets to share their expertise with Stockhead readers.

The holiday season has seen investors place presents under the trees of previously cash-strapped ASX companies as raisings flood the market.

The December quarter has well and truly seen the floodgates for capital open wider than Arne Slot's Liverpool defence as retail money returns to the space.

The ASX said $10.9bn in new capital was quoted in November against $4.3bn in the same month in 2024, with net new capital of $9.3bn taking YTD net new capital to $19.3bn, against -$15.3bn in the first five months of FY25.

Precision Funds Management portfolio managers Dermot Woods and Andy Clayton say the end-of-year rush has seen some 125 companies raising fresh cash since the start of November, likely to rise to 150-odd as bankers squeeze in their last deals ahead of Christmas over the next two weeks.

With so much liquidity flooding the market, the veteran stockpickers are pleading the importance of remaining patient.

Having just raised an additional $25 million, the Perth fund is looking at opportunities in resources that are diversified from gold and waiting for volatility so it can load up on quality names.

"We'd be talking to people about ... just maintaining the discipline. Since the start of November there's been over 125 raisings," Woods said.

"And that's not including the last day or two.

"I can't remember a flood quite like the one we've seen in the last few weeks. Just we … I don't know if we take any of them on.

"We might be running a hit rate of one out of fifty, maybe less.

"It's just important that you don't end up with a portfolio with this tail of stuff where ... come a tougher market you're going 'why am I playing the fourth or fifth derivative in something?'"

Find quality names

Moments of volatility, market dips caused by broader, short-lived macroeconomic shocks exemplified by Donald Trump's Liberation Day tariffs in April this year, can be a trigger to get quality resources stocks at a discount.

One example was copper mid-tier Sandfire Resources (ASX:SFR), which has more than doubled since falling to $8.15 in the week after Trump's market shaking announcement.

Even as liquidity enters the mining investment space, it's worth ensuring names that offer high quality exposure to key themes are in your portfolio, Woods and Clayton believe.

"(Look for) the best quality in the space. So if you're going to buy a lithium stock, buying Pilbara going back a few months," they said.

"You don't really get paid for taking all the risk of going down the curve, especially in today's market where liquidity's become so much more important."

It can be hard to maintain discipline when small caps are chasing cash all over the sector, with a rising amount of capital from smaller, private sources now available for juniors to tap.

"The retail punter has returned. The private client money has returned, I think, and that's been a long time coming," Woods said.

"We're back to 2021 but ... maybe more focused on the resources sector this time around than tech and stuff like that."

With fresh capital of their own, how hard the market has run has got Precision remaining patient.

While the gold market has "a bit more froth and bubble to it", Woods said the fund is looking closely at resources opportunities outside the hot space.

Precision looks closely at commodities where the supply-demand scenario is not yet reflected in commodity and equity prices like coking coal, uranium and, until recently at least, copper, as well as continuing to let their bullish thesis on mining services stocks play out.

Best in breed

So which mining equities do Woods and Clayton view as 'first derivatives' right now?

One is uranium developer NexGen Energy (ASX:NXG), which owns the high-grade Rook I uranium discovery in the Athabasca Basin.

That project, once built, will be the largest standalone producer of yellowcake.

"That got down to sub-$12 it's now back to ~$14.20," Clayton said.

"That's certainly a first derivative type, it's best in breed out there in the uranium landscape."

In the copper space, Precision remains a big holder in Canadian explorer FireFly Metals (ASX:FFM), which has shot up to a $1.2bn valuation on the expansion of the resource at the Green Bay copper and gold project in Newfoundland.

The fund also holds Sandfire and NSW junior Peel Mining (ASX:PEX), which recently had a change of management, bringing the former New World Resources team of Nick Woolrych and Warwick Ellis in to run the show as MD and CFO.

From a broader strategic point of view, Woods and Clayton say it pays to wait for blips to load up on quality.

"It's been a very benign market and they don't tend to be benign forever," Woods said.

Originally published as Precision Points: As liquidity flies, don’t chase a hot market to the last derivative