Today, I'm going to attempt to pick an unlikely trifecta of winners.
1) Whether the Reserve Bank of Australia (RBA) will cut interest rates today.
2) A small-cap growth stock to out-perform the market over the next two years.
3) The winner of the Melbourne Cup.
My bet is the RBA will leave interest rates on hold today.
With inflation low, and the big four banks recently jacking up interest rates, I wouldn't be overly surprised to see Glenn Stevens cut the cash rate to 1.75%.
The financial markets are suggesting its a line-ball call. The easy option for the RBA is to do nothing this month, keeping their powder dry for another day. When it comes to making bets, I'll take the easy option all day long.
My small-cap growth stock bet is one I already own, a company called Adacel Technologies Limited (ASX: ADA).
Adacel sells air traffic control systems and air traffic control simulators. It also provides voice technology that can be used to speak directly to aircraft and replace human controllers during training. Air traffic is set to rise over coming decades as flying becomes increasingly accessible to those in the developing world, and Adacel's world class products are set to be beneficiaries.
The company is on a roll, having recently upgraded its profit guidance, predicting profit growth of around 50% in the current financial year. This was up from previous guidance of profits being at least 25% higher.
It's a significant upgrade, initially sending the shares 25% higher late last week. Since then, possibly due to profit taking, or just a general malaise in the share market, Adacel shares have drifted back a bit to the $1.40 they trade at today.
As with any small company, there are risks. Although Adacel has strong relationships with its customers, including the Federal Aviation Administration and the United States Air Force, such customers can be fickle, and funding can be switched off at the drop of a hat. They also operate in a cyclical business, and it's difficult for the company to predict the timing and size of new and ongoing business.
Adacel shares are up over 400% in the last 12 months. That alone might put some people off. Yet the shares trade on a forecast forward P/E of less than 20 times earnings, a modest rating given their current growth rate. Plus, as an added bonus, they pay a dividend, albeit the trailing dividend yield is a modest 1.4%.
As a business, Adacel has plenty of momentum. I'm betting on the momentum continuing for at least the next couple of years, and hopefully longer.
And now for the third leg of my trifecta — The Melbourne Cup.
As ever, I've enlisted the help of Lewy, the Fool's resident horse racing pundit.
In 2011, he tipped Dunaden, and last year's winner Protectionist was amongst his top three selections.
This year, Lewy's offering up four selections, including a couple at very juicy odds.
The last of the big spenders, I'm wagering $5 each way on each horse. My hopes are high, my expectations low.
Over to Lewy. Happy punting.
Today sees another fascinating renewal of our greatest race, The Melbourne Cup.
Such is the global attraction of the Cup that 18 of the 24 horses lining up this year were sired in the northern hemisphere.
Only one Australian born horse – Shocking in 2009 – has been successful in the Cup this century, making it hard to argue that the foreign raiders are not the more superior stayers (yes the Kiwis have won four in that period but they also won at Twickenham in the early hours of Sunday morning so very happy to delineate this week!).
The usual protagonists will be out in force. Gai, Freedy, David Hayes and the irrepressible Chris Waller flying the flag for our local trainers. Sir Michael Stoute, Aidan O'Brien and Ed Dunlop are headlining the training royalty from afar. Alas, there will be no Bart…
The depth and quality of the 2015 field is arguably unparalleled. A reasonable case can be made for at least 20 of the 24 combatants, though it would be decidedly un-Australian to not try and refine those 20 into a more manageable shortlist. Here's mine:
10. Trip To Paris ($9) – the Caulfield Cup remains the key lead up to the Cup and this Irish raider turned in a slashing Cup trial with a fast finishing 2nd to Mongolian Khan. Trip To Paris not only ticks the 'acclimatised' box with that effort – a key pre-requisite for previous foreign Cup winners – but his best form to date has been over distances nearer the Cup trip of 3,200m.
His trainer Ed Dunlop, also starts Red Cadeaux who remarkably has placed 2nd in this race on 3 previous occasions. I for one, won't begrudge Ed going one better this year with Trip To Paris.
17. Almoonqith ($16) – this American born locally trained import turned in a fantastic Cup trial with a dominant victory in the Geelong Cup – a lead-up race that has provided 3 Cup winners this century. To my eye, Almoonqith appeals as the progressive, but still reasonably weighted candidate in this year's edition, and on that basis, presents as an excellent betting opportunity.
David Hayes trained his one and only Cup winner way back in 1994. He now trains in partnership with Tom Dabernig and with Almoonqith, the pair have a real chance of adding to David's historical win.
6. Hartnell ($34) – based in Dubai and funded by the Maktoum family, the Godolphin racing operation is the world's largest. John O'Shea heads up its Australian arm and in Hartnell, Godolphin have a live chance, at odds, in this year's race.
In the Sydney Autumn carnival, Hartnell defeated impressive Japanese weight-for-age (WFA) horse To The World in the $1.5m BMW over 2,400m. His preparation for this year's Cup appears timed to the minute and importantly, his BMW win suggests he has the requisite class to win a Cup in the modern era.
7. Hokko Brave ($40) – rounding out my top 4 is the 'other' Japanese horse and stablemate to the favourite. Hokko Brave's run in the Caulfield Cup was very good, covering ground and racing in what appeared to be inferior ground in the straight. At face value his run was almost as good as Fame Game and Trip To Paris and yet $40 is available tomorrow so he's well worth an each-way ticket.
Both Fame Game and Preferment have undeniable claims but appear to have been 'well found' by the market. Fame Game is effectively priced as a 20% chance of winning by the market compared to say Trip To Paris at 10%.
Personally, I think that disparity is too great so am happy to bet around a couple of the more fancied runners and look for value.
