Category: Stock Market

The S&P/ASX 200 Index (ASX: XJO) enjoyed another mild recovery day this hump day, adding to yesterday’s modest rise.

After a brief dip into negative territory this morning, the ASX 200 spent the rest of the day in the green, closing up 0.31%. That leaves the index at 8,640.6 points.

The optimism that we saw on the local markets this Wednesday followed a similarly optimistic morning on the American markets.

The Dow Jones Industrial Average Index (DJX: .DJI) fared decently, gaining a timid 0.1%

The tech-heavy Nasdaq Composite Index (NASDAQ: .IXIC) was more decisive though, rising 0.47%.

But let’s get back to the Australian markets now and check out what was happening amongst the different ASX sectors this session.

The post Here are the top 10 ASX 200 shares today appeared first on The Motley Fool Australia.

More reading

• 3 ASX healthcare stocks tipped to soar over 100% higher this year
• Electro Optic Systems just had its DroneShield moment. Here’s what investors should know
• Markets brace for the next shock as global tensions flare up
• Why EOS, Humm, New Hope, and Sims shares are storming higher today
• Why are Telix shares racing 8% higher today?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield and Telix Pharmaceuticals and is short shares of DroneShield. The Motley Fool Australia has recommended Premier Investments and Telix Pharmaceuticals. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ASX healthcare stocks are a popular option for investors seeking defensive assets with long-term structural growth.

These shares can offer portfolio diversification, drive high margins, and some of them have huge potential upside.

Here are three ASX healthcare stocks on my radar this week, and analysts are tipping upside well over 100% over the next 12 months.

Pro Medicus Ltd (ASX: PME)

The beaten-down medical imaging technology stock has dropped another 1.7% in Wednesday afternoon trade, to $125.69 a piece. The decline is part of a long string of declines off the back of sector-wide headwinds, which have seen the share price crash 62% from an all-time high recorded in mid-2025.

Sentiment didn’t improve when the company posted a record-breaking half-year FY26 result in mid-February. Its revenue was up 28%, and profit jumped nearly 30%, but it still missed investors’ high expectations.

But Pro Medicus has won several contracts so far in 2026, including two $40 million five-year contract renewals with its wholly owned US subsidiary, Visage Imaging, earlier this month.

I think the stock is trading well below value right now. And analysts are tipping potential for a 139% upside to $300 per share over the next 12 months.

Telix Pharmaceuticals Ltd (ASX: TLX)

Telix shares are racing higher on Wednesday, recovering some losses seen during a sharp sell-off last year.

Despite several recent headwinds, it looks like Telix shares are finally rebounding. The positive sentiment started when it filed a key regulatory approval in Europe. News of positive results from its Global Phase 3 ProstACT study last week, followed by an announcement that the company has resubmitted its New Drug Application (NDA) to the US FDA for its brain cancer imaging candidate TLX101-Px (Pixclara®), has seen investors flock to the stock.

Analysts tip the ASX healthcare stock to jump 156% to $31.59 a piece over the next 12 months.

Clarity Pharmaceuticals Ltd (ASX: CU6)

The clinical-stage radiopharmaceutical company’s shares jumped higher this week on the back of good news about the development of new trial data for its prostate cancer imaging technology. The findings will be used as a basis to form a new drug submission to the FDA.

It’s good news after Clarity shares suffered from volatility over the past five months, fluctuating anywhere between $5.70 and $2.73. 

Analysts are excited about the prospects for growth of the ASX healthcare stock’s business fundamentals and share price over the next 12 months. They have a consensus buy rating with a maximum target price of $9. That implies a potential 157% upside at the time of writing.

The post 3 ASX healthcare stocks tipped to soar over 100% higher this year appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Why Brightstar, EQ Resources, Novonix, and Pro Medicus shares are falling today
• Why are Telix shares racing 8% higher today?
• Buy, hold, sell: Clarity Pharmaceuticals, New Hope, and Orica shares
• Exciting clinical news for this ASX healthcare stock earns it a buy recommendation 

Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Telix Pharmaceuticals. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Pro Medicus. The Motley Fool Australia has recommended Pro Medicus and Telix Pharmaceuticals. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Shares in Xero Ltd (ASX: XRO) are pushing higher on Wednesday, offering a rare cheer in what has been a brutal year.

During late afternoon trade, the Xero share price is up 2.42% to $79.50.

Even so, the stock is still down around 30% this year and remains far below its previous levels.

Improving backdrop for small businesses

Recent data suggests conditions may be stabilising for Xero’s core customer base.

According to The Australian, Citi analysts see scope for margin improvement as hiring slows across the business.

At the same time, business formation remains strong. Australian registrations are up 19% year-on-year, while US applications have risen 18%.

There are also signs of reduced financial stress. Insolvencies in Australia have declined by 8%, which points to lower churn risk among small business customers.

This combination of steady demand and improving conditions could support Xero’s revenue growth going forward.

Cost pressures may be easing

Another key factor that was mentioned is the company’s cost base.

Headcount growth has slowed significantly to around 1%, while job listings growth has dropped from 18% to 8%.

This suggests Xero is becoming more disciplined with hiring, which could help control expenses after a period of heavy investment.

Citi believes this may lead to stronger margins into FY26 if cost growth remains contained.

Share price still reflects cautious sentiment

Despite today’s gain, the broader trend remains weak.

The stock has fallen sharply from levels above $150 over the past year and has struggled to hold gains in recent months.

Xero still trades on a price to earnings (P/E) ratio above 50 times, which leaves little room for disappointment if growth slows.

The recent weakness also reflects widespread pressure across global tech stocks, where valuations have been reassessed.

Technical signals show early stabilisation

Despite the gloomy backdrop, the selling pressure may be starting to ease.

The relative strength index (RSI) is sitting around the mid 40’s, indicating the stock is no longer heavily oversold but still lacks strong momentum.

The share price has also been trading near the lower end of its recent range. Support appears to be forming in the low $70 region, while resistance sits closer to $90.

Recent moves near the lower Bollinger Band followed by a rebound can sometimes point to short-term stabilisation.

Foolish takeaway

Xero shares are moving higher again, with some signs that conditions are starting to improve and costs are easing.

That said, the stock is still well below its previous highs after a recent decline.

While the selling is starting to ease, the overall trend remains weak and will need stronger results to change.

The post Xero shares rise again. Is this the start of a turnaround? appeared first on The Motley Fool Australia.

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• Top brokers name 3 ASX shares to buy today
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Many of Australia’s top brokers have been busy adjusting their financial models and recommendations again. This has led to a number of broker notes being released this week.

Three ASX shares that brokers have named as buys this week are listed below. Here’s why their analysts are feeling bullish on them right now:

Orica Ltd (ASX: ORI)

According to a note out of Morgans, its analysts have retained their buy rating on this commercial explosives company’s shares with an improved price target of $25.35. This follows the release of a stronger than expected trading update earlier this week. In addition, the broker was pleased to see that Orica has settled its litigation in the United States and announced an acquisition in the country. Morgans believes that the latter will strengthen its US operations. Outside this, Morgans highlights that the company has leverage to attractive industry fundamentals, market leading positions, solid earnings growth, proven management team, and a strong balance sheet. The Orica share price is trading at $20.02 on Wednesday afternoon.

Perseus Mining Ltd (ASX: PRU)

A note out of Ord Minnett reveals that its analysts have upgraded this gold miner’s shares to a buy rating with an increased price target of $6.80. The broker made the move after Perseus Mining announced the sale of its Meyas Sand gold project in Sudan. Ord Minnett was pleased with the price that the company has received, especially given the difficulties operating in a country experiencing a civil war. Overall, it sees Perseus Mining as one of the best ways to gain exposure to the African gold industry and feels that the sale of the Meyas Sand gold project strengthens the quality of its portfolio. The Perseus Mining share price is fetching $5.19 at the time of writing.

Xero Ltd (ASX: XRO)

Analysts at Citi have retained their buy rating and $144.80 price target on this cloud accounting platform provider’s shares. According to the note, the broker believes that macro trends are positive for Xero. It highlights that business formation is accelerating in both Australia and the United States, while insolvency trends are improving. This combination points to positive demand for its platform according to the broker. Coupled with potential margin expansion from cost efficiencies and AI adoption, Citi believes Xero is well-placed to grow its earnings. The Xero share price is trading at $79.66 on Wednesday.

The post Top brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

More reading

• Xero shares rise again. Is this the start of a turnaround?
• Buy, hold, sell: Clarity Pharmaceuticals, New Hope, and Orica shares
• The bulls are coming: 2 of the best ASX 200 shares to buy now to get ahead
• Which ASX gold shares have risen the most in 2026?
• How high does Macquarie think Orica shares will go?

Citigroup is an advertising partner of Motley Fool Money. Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The BHP Group Ltd (ASX: BHP) share price is rising on Wednesday.

In afternoon trade, the mining giant’s shares are up almost 1% to $50.16.

This is despite a big announcement hitting the wires today that revealed that the Big Australian’s CEO, Mike Henry, is stepping down.

BHP share price higher despite CEO exit

Under outgoing CEO Mike Henry, the company has generated impressive shareholder outcomes.

According to the company’s release, BHP delivered average total shareholder returns of approximately 17% per annum during his tenure and returned around US$80 billion to shareholders.

This performance has been supported by a simplified portfolio, a stronger focus on high-margin assets, and increased exposure to future-facing commodities such as copper and potash.

So, what does a leadership change mean for the BHP share price? Let’s look into it.

Where next for BHP shares?

In many cases, a CEO transition can create uncertainty. Investors may worry about changes in strategy, capital allocation, or execution risk.

However, this situation looks different.

The incoming CEO, Brandon Craig, is a long-time executive who has been with BHP for more than 25 years. He has held a number of senior operational roles and most recently led the company’s Americas division, where he was responsible for advancing its growth strategy in key commodities.

Strong track record

Importantly, Brandon Craig’s track record suggests continuity rather than disruption.

Mr Craig has played a role in strengthening BHP’s position in copper and potash, both of which are expected to be major drivers of future demand. He also previously led the Western Australia iron ore business, where he helped improve operational performance and reinforce its position as a low-cost producer.

This internal appointment appears to signal that the company is unlikely to shift direction in a meaningful way.

Instead, it suggests that BHP intends to continue executing its existing strategy, which focuses on high-quality, long-life assets and commodities linked to global growth and electrification.

From a BHP share price perspective, that stability could be reassuring.

Markets often react negatively to unexpected leadership changes or external hires with unclear agendas. In this case, the transition appears well planned, with the outgoing CEO remaining involved during a handover period to ensure continuity.

Overall, while leadership always matters, this transition looks more like a continuation of a successful strategy than a reset.

The post What does a change of CEO mean for the BHP share price? appeared first on The Motley Fool Australia.

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• Buy, hold, sell: BHP, CSL, and Woodside shares

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The WiseTech Global Ltd (ASX: WTC) share price has had a tough run in 2026.

At the time of writing, the WiseTech share price is sitting at $45.26, up just 0.07% today.

However, that small gain does little to change the bigger picture. The stock is still down around 34% year to date and remains well below its highs from last year.

So, is the worst now finally behind it?

A sharp fall followed by signs of stabilisation

Recent trading data shows that WiseTech shares have been under steady pressure over the past few weeks.

The stock has dropped from above $50 earlier this month and briefly traded closer to the low $40 range. Over the past 5 trading sessions, declines of up to 4% have been common, pointing to ongoing selling pressure.

However, there are early signs that momentum may be stabilising.

Technical indicators suggest the stock has been approaching oversold territory. The relative strength index (RSI) has been hovering around the low 40’s, after previously dipping lower. While not deeply oversold, this level can sometimes indicate that selling pressure is starting to ease.

At the same time, the share price has been trading near the lower end of its Bollinger Bands. This often signals that volatility has expanded during the sell-off and that a short-term bounce is possible.

Support levels starting to form

From a technical set of eyes, the $44 to $45 range is emerging as a key support zone.

The stock has tested this level multiple times in recent sessions and has so far managed to hold above it. If this level continues to act as support, it could provide a base for a potential recovery.

On the upside, resistance appears to be forming in the $48 to $50 range, where previous rallies have stalled.

A move above that level would likely be needed to improve investor sentiment.

What’s been driving the weakness?

The recent fall in WiseTech shares hasn’t been caused by one specific update.

Instead, it comes down to a mix of factors.

Tech stocks have been under pressure lately, especially high-growth companies. Higher bond yields and valuation concerns have weighed on the sector.

At the same time, WiseTech has faced its own challenges. These include governance concerns, ongoing restructuring, and its shift toward AI, which has added some uncertainty.

There have also been mixed broker updates, with some price targets lowered, which hasn’t helped sentiment.

Foolish Takeaway

WiseTech shares are still under pressure, but the sell-off looks like it may be slowing.

The stock is holding around current levels, and technical indicators suggest the heavy selling may be easing.

That said, there is no clear sign yet that the trend has turned.

The WiseTech share price could be starting to move sideways rather than falling further in the short term.

The post Has the WiseTech stock finally hit rock bottom? appeared first on The Motley Fool Australia.

More reading

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• 3 reasons to buy WiseTech shares today

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended WiseTech Global. The Motley Fool Australia has positions in and has recommended WiseTech Global. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

CSL Ltd (ASX: CSL) shares are down 1.4% in Wednesday afternoon trade. At the time of writing, the beaten-down biotech stock is trading at $139.13 per share.

Today’s decline means the shares are now down 19% year to date and 44% over the year.

The company has faced significant headwinds recently, including lacklustre financial results, a shock CEO exit, and a surprise restructure announcement. CSL also downgraded its FY26 revenue and profit growth guidance in October, pushing its share price further south.

While the past 18 months have been filled with doom and gloom, I still see some great potential in CSL going forward. 

Here are three reasons why adding CSL shares to your portfolio today could be a great idea.

1. There is huge and recurring demand for its products

CSL is an Australian-based global biotechnology company that develops and delivers biotherapies and vaccines. At the core of its business are its plasma-derived medicines, including immunoglobulins, albumin, and clotting factors. The company’s blood plasma division dominates the market for rare blood disorders and immunoglobulin products. 

Demand for plasma therapies is strong and growing, driven by recurring demand, limited competition, and supply constraints. Recent reports indicate that demand for blood plasma derivatives was around 145 million litres in 2025 and is expected to increase significantly in 2026. The market was valued at $52.16 billion in 2025, and by 2033, it is expected to reach $104.30 billion.

2. The business is building momentum

CSL is one of the world’s largest biotech companies, and despite short‑term headwinds, earnings momentum is expected to keep building. CSL has experienced periods of double‑digit profit growth, and its forecasts underpin a longer‑term recovery.

Sequoia Wealth Management’s Peter Day, who has a buy recommendation on CSL shares, recently pointed out that the company has posted a significant increase in revenue during the past three years and delivered earnings growth that is compounding at double-digit rates.

3. Analysts are very bullish

Analysts are bullish about the outlook for CSL shares over the next 12 months. Many say the investor sell-off was way overdone and unwarranted.

TradingView data shows that 12 out of 18 analysts currently have a buy or strong buy rating on the stock. The average target price is $207.6, which implies a 50% upside at the time of writing. However, some think the share price could storm even higher, by 95% to $270.01 a piece.

The post 3 reasons to buy CSL shares today appeared first on The Motley Fool Australia.

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Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Supermarket giants Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL) have had a rivalry spanning decades. From grocery prices to product lines, revenue growth, and even share prices, the two retailers compete for nearly everything with Australia’s supermarket and grocery retail sector.

Shares of both supermarkets have been neck and neck for some time, but so far in 2026, Woolworths is storming ahead.

Here’s what has happened, and what to expect next.

What’s happened to Woolworths shares this year?

Woolworths shares are down 0.25% in Wednesday afternoon trade, to $35.74 a piece. Despite the blip, the supermarket’s shares have stormed 21% higher so far in 2026. They’re now up 27% over the year.

It’s welcome news for investors after the retailer’s shares nosedived nearly 20% in August last year after it posted a disappointing FY25 result. The share price dropped to an all-time low in mid-October. It was saved from any further declines following Woolworths’ positive first-quarter sales update late last year.

The company posted its half-year FY26 results in late February, revealing a 3.4% increase in sales, a 14.4% increase in earnings before interest and tax (EBIT), and a 16.4% surge in net profit. 

Investors were thrilled, and the share price soared 15% to an 18-month high. Since then, Woolworths shares have remained relatively stable.

Analysts project the momentum to continue throughout the second half of FY26. It looks like the business is beginning to reap the rewards of its turnaround strategy implemented last year.

What’s happened to Coles shares this year?

Coles shares are down 0.3% at the time of writing, to $21 a piece. It’s been a pretty volatile start to 2026 for the supermarket giant, with its share price wildly fluctuating. The share price is now down 1.7% for the year to date and 13% higher over the past year.

Unlike Woolworths, Coles’ growth strategy paid off late last year. The retailer experienced a surge in its value in 2025, particularly following its FY25 results announcement in August. 

As Coles moved into 2026, the tide began turning, and positive sentiment from last year lost momentum.

The decline picked up pace after Coles’ half-year FY26 results revealed broadly strong growth figures. This included a 3.2% increase in sales revenue and a 7.8% increase in EBITDA. But these were unwound by a 11.3% decline in net profit. 

The result missed expectations, failed to match rival Woolworths’ results, and spooked investors.

But analysts generally expect Coles to recover through 2026 after its strategic cost-saving initiatives begin to flow through to its financials.

Are Woolworths and Coles shares a buy, sell, or hold?

Despite the latest share movements out of the two supermarkets, analysts aren’t expecting Woolworths shares to outperform Coles for much longer.

TradingView data shows that most analysts (12 out of 18) have a hold rating on Woolworths shares, with a maximum target price of $39. That implies a potential 9% upside at the time of writing.

However, data shows that analysts are much more bullish on Coles shares. Of 18 analysts, 15 have a buy or strong buy rating on Coles shares, with a maximum upside of $24.90. That’s a 19% upside from the current trading price.

It looks like the supermarket war isn’t over yet.

The post Woolworths shares are storming ahead of Coles this year: Are the supermarket giants a buy, sell, or hold? appeared first on The Motley Fool Australia.

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Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Woolworths Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Silver prices have continued to move lower this week, with the precious metal now trading at around US$79 per ounce. That leaves silver down roughly 8% over the past 5 trading sessions, marking a sharp pullback from recent highs above US$80.

The decline comes after a strong run earlier in 2026, where silver had surged on the back of geopolitical tensions and rising demand for safe haven assets. However, recent data suggests that momentum has started to fade as market conditions shift.

Silver drifts toward multi-week lows

According to Trading Economics, silver recently fell to near a 1-month low as investors reassessed inflation risks and the outlook for interest rates.

Despite the ongoing war in the Middle East, markets have begun to stabilise. While earlier disruptions had pushed investors into precious metals, recent sessions have seen a partial unwind of those flows.

At the same time, the US dollar has remained firm, while US Treasury yields have also stayed elevated.

Central bank expectations remain steady

Another key factor has been shifting expectations around monetary policy. Investors are increasingly pricing in a scenario where the US Federal Reserve keeps interest rates steady for longer.

Recent commentary and market pricing indicate that rate cuts may not come as quickly as previously expected. This has supported the US dollar and reinforced pressure on precious metals.

Other major central banks, including the European Central Bank and Bank of England, are also expected to maintain their current policy settings in the near-term.

ETF flows and positioning soften

Recent data also points to weaker investor positioning. Reports indicate that global silver ETF holdings have declined in recent sessions, with outflows reversing part of the inflows seen earlier in the year.

Futures positioning has also eased. Non-commercial net long positions in silver have pulled back from recent highs, showing less bullish positioning from traders.

In addition, margin requirements for precious metals futures have increased, which has reduced leverage and speculative activity.

Industrial demand remains a key support

Despite the recent price weakness, silver continues to be supported by its role as an industrial metal. Demand from sectors such as electronics and solar energy remains a core component of the market.

According to industry data, silver is still expected to face a supply deficit in 2026, with strong consumption from manufacturing and technology applications.

However, in the short-term, macroeconomic factors appear to be having a greater influence on price movements.

What this means for ASX investors

The pullback in silver prices has also flowed through to listed investment products.

The Global X Metal Securities Australia Ltd (ASX: ETPMAG), which provides exposure to physical silver, is currently trading at $102.78, down 3.70%.

The ETF has also declined over the past week, broadly tracking movements in the underlying silver price.

While silver remains higher over the longer term, the recent decline shows how quickly sentiment can shift in commodity markets.

The post Silver slides again as momentum fades. Should investors take profits now? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Electro Optic Systems Holdings Ltd (ASX: EOS) shares fell around 16% yesterday after the company revealed that senior executives had exercised their share options and signalled plans to sell some of their shares.

For a company with a share price that has risen 7 times over the past year, the reaction was sharp, but not entirely unexpected.

Whilst EOS shares have rebounded today, the pattern will look familiar to investors. DroneShield Ltd (ASX: DRO) followed a similar path, starting off with a powerful geopolitical tailwind, a rapid rise in the share price, and then volatility as insiders began to sell.

So what can investors learn from this?

The work happens before the rally

Before their share prices surged, both EOS and DroneShield had significant periods of underperformance. EOS shares, for example, were down 70% from March 2021 to May 2025.

At some point, there was an inflection point, and the fortunes of these companies changed. This highlights the importance of constantly turning over ideas, understanding what a company does, and critically assessing what could go right and what could go wrong as the market environment evolves.

The stock market is dynamic, and it can throw up opportunities from unexpected places. Spotting those opportunities when they emerge requires you to put in the work before it’s obvious who the winners are.

You need a risk management plan

Most investors spend time thinking about what to buy, but far fewer think about how to manage a position as it evolves.

Risk management takes different forms, but it starts with position sizing. If you bought EOS or Droneshield shares, was it 5% of your portfolio or a 10% position? Whatever it is, that decision matters more than most people realise, especially with volatile small caps.

But it doesn’t stop there.

What happens if that position performs exceptionally well? A 10% position can quickly become a much larger part of your portfolio. That’s a great problem to have, but at that point, the question shifts from “Is this a good investment?” to “Is this too much allocation to one idea?”

Some investors decide to sell a portion and trim along the way. Others rebalance back to a target weight, e.g. back to 10%. And others simply do nothing and let it ride.

There’s no single right approach; it depends on your assessment of the company’s prospects, plus your own objectives, time horizon, and risk tolerance.

The key is having a plan before you need it.

Because when a stock is moving quickly (up or down), decisions made in the emotion-fueled moment are rarely the best ones.

Expect insider selling

Naturally, investors will want management to stay invested all the way through, but that’s not what typically happens.

At EOS, management exercised options at prices as low as 50 cents, with the stock recently trading around $10. With millions of dollars on the table, most people in that situation would likely choose to sell a portion of their stake, perhaps to buy a house (or a better house!).

Investors may prefer management to stay fully invested, but in reality, selling is what usually happens.

You should expect it and the volatility that comes along with it, then position accordingly.

Fundamentals and valuation still matter

A falling share price doesn’t automatically mean the business is weakening, but also a growing business doesn’t automatically mean it’s a better investment idea.

It’s entirely possible for a company’s fundamentals to improve meaningfully (for example, doubling the expected value of its future cash flows) while the share price rises by 10x.

In that case, the business is stronger, but the investment opportunity may actually be less attractive.

That’s the distinction investors need to make, but admittedly, it’s easier said than done.

Foolish bottom line

Stocks like EOS and DroneShield can deliver exceptional returns, but those returns come with volatility. The advantage comes from doing the work early, managing risk as the position evolves, and understanding that price and value don’t always move in lockstep.

The post Electro Optic Systems just had its DroneShield moment. Here’s what investors should know appeared first on The Motley Fool Australia.

More reading

• Why EOS, Humm, New Hope, and Sims shares are storming higher today
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Motley Fool contributor Kevin Gandiya has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield and Electro Optic Systems and is short shares of DroneShield. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.