I’ve wanted to create a post with a case study for analysis for a long time, and EZZ turned out to be the perfect candidate. What was meant to be just a few paragraphs ended up being quite a lengthy post - but I hope someone finds it useful.
I used AI to clean up and format the text to make it easier to read and follow. It’s all my original content, just polished for clarity.
EZZ 10-Bagger Case Study: How Broker Data Reveals Smart MoneyThe growth of EZZ shares is actually a pretty interesting case study to see how growth happens and how to make 10 bags.I want to share what I see here, how different brokers behave. When I talk about brokers, I talk about clients of those brokers of course.This is the story that everyone is trying to find and make 10x. So, I thought it would be interesting for someone.I'll share some data and my interpretation.
Please note, it's just my subjective interpretation and maybe sometimes trying to connect dots that aren't there.The Setup: Perfect Conditions for a 10-BaggerI think important prerequisites for this type of move is being a fresh company.EZZ had its IPO in March 2021 with Top 20 holding about 80%.That means low free float. Also, because it's new, coverage of the company is not yet initiated by brokers.
Market Capitalisation in March 2024: $22M AUD. Share price: $0.52.
Share price started to grow here and in October 2024, in six months, reached $5.00 making 10 bags.
Understanding the Broker DataLet me give a quick explanation of what's in the screenshots.
The table shows how much volume (value) of company shares were traded per each broker during a certain date range.
So, as a result you can see that, for example on March 1 (just a random date, not on screenshot), you can see that 1 million shares were bought by clients of CommSec and 2 million were sold. That means net volume traded is -1M, in other words - collectively clients of CommSec distributed shares to clients of other brokers.
The yellow line on the screenshot basically demonstrates the trend of change of holdings for a selected broker. In this case for CommSec. As you can see, the line goes down, which means that net volume traded is negative and decreasing - that means CommSec clients as a group are selling over this period.And overlaying on the price helps to understand how this accumulation/distribution trend correlates with the price action.
The CommSec Pivot: First Warning SignWhat we see on the screenshot above is that the yellow line was quite flat during September - December 2023 and then pivoted down and we can see it decline.
Why is this interesting?This is usually the first thing I look for. I like to spot the moment when CommSec clients pivot from buying to selling. Ideally, it should coincide with reaching certain milestones.
Why is CommSec so special?CommSec clients are mainly retail clients - mums and dads. Most of us here are part of this huge group of retail investors. Retail investors are worse than professionals, let's be honest, not only in terms of research but also in terms of risk management and money management. Of course, there are individuals who are really good in all these components, or just research and share this on HotCopper (I say it many times), but as a group, collectively, we are bad, we are losing money for sure.
There are a few other retail brokers, like AIEX or CMC Markets. But I think at least 80% of retail trades use CommSec.
So, back to the screenshot. We see there are many brokers. Most of them are professional brokers of different sorts. Someone buys, someone sells. They all have reasons. However, it's usually interesting to see the disposition or balance between retail investors and professionals. Basically, two quite distinct groups of investors. Because it's kind of hard to analyse what these professional brokers do in respect to each other, the best way to understand the balance between these two groups is to check the trend of accumulation/distribution for CommSec clients.
If CommSec clients are selling, someone is buying. That means professionals as a group are buying.
In this case, from Feb 2024 we see decline in holdings, which means that over hundreds and thousands of transactions between market participants, shares slowly drifted from CommSec clients to clients of other brokers - professional investors who usually made their homework better and better understand the value.This chart clearly demonstrates that as price goes up, retail continues to sell.
This is the first indicator. As any indicator, it indicates, and is not always a perfect indicator.
UBS Securities: The Awakening
Now, let's move to analysing the next broker - UBS Securities.As you can see on the screenshot below, the table is ordered by total volume traded. UBS is the second largest trading volume as you can see.
As you can see, the accumulation/distribution chart is completely different here. It was almost flat and then in Feb 2024 it became alive. Accumulation started. Hard to know the reason now, it might be coverage by UBS initiated for their clients or just when the company achieved another milestone, it brought interest from some clients of UBS. But what it indicates is inflow of new money. As a result, this money very likely affected the price.
Interactive Brokers: International InterestNext broker that seems interesting - Interactive Brokers.Also, quite flat accumulation chart and then very determined accumulation by the clients of IB. Interactive Brokers is a multinational broker. It serves retail and professional investors. I don't think that IB is used significantly by Aussie retail investors so I treat IB usually as professional from more likely overseas.
I'm not entirely sure if it was initiation of some sort of coverage that triggered such interest. I know that many overseas brokers don't give access to all companies on ASX to their clients, only top 300-500 and then gradually add them when needed. That's what may have happened here.
Merrill Lynch: The Liquidity ProviderNext, Merrill Lynch. I'd characterise them in micro cap space or small cap space as provider of liquidity really. So, accumulation chart is not that important in this context here. Based on my analyses, they do a lot of short selling however their total volume is quite big.
The screenshot below combines accumulation charts for IB and Merrill Lynch. You can see the huge difference. You can see that Merrill Lynch didn't really accumulate a lot. They traded huge volume but it was buy-sell constantly.
FNZ Custodians & FinClear: The CR/IPO ParticipantsNext broker - FNZ Custodians. This broker serves different sort of clients but quite often it's used in small cap space by companies and investors who participate in capital raisings or IPOs.
That's why here we can see distribution of shares but gradual. It is quite often the case that after another CR in micro cap space, massive distribution comes from FNZ Custodians and FinClear Execution - another one that's used by CR participants.
Here is the chart for FinClear Execution - you can also see distribution of shares as price goes up.
The Investment Banks Join InNext - Citigroup. Again, flat and then huge spike - might be another initiation of coverage.
And one more - Macquarie Securities - also, at some point in July 2024 started to buy aggressively.
Key Insights: What Creates 10-BaggersLet's make intermediate summarisation: This demonstrates that
when new brokers appear for some reason here, it adds to the competition to get the shares and creates urgency to get these shares that leads to price growth. That's why recently IPOed companies with limited share flow and emerging business are the best candidates for 10 bags.
Also, there's not much sell pressure as we can see. Some professional investors sell via FNZ Custodians and FinClear Execution but it seems like there's no fierce competition to sell as there is to buy. CommSec clients are also not rushing to sell.
I've done a few similar analyses on other stocks but never documented it in the same format as here though, but the conclusion is the same - arising interest from a broker or brokers that didn't show any activity before is a very powerful indicator of price growth. It can be really any - IB or Canaccord or any other.
But in this case, we also have initiation of interest from investment banks - their clients are more powerful usually in terms of effect on price because these guys are usually some kind of fund and when they decide to buy - they buy, they don't wait for pullbacks.
The Investment Bank Group Analysis
To track this better, I've actually created a group of brokers that I call Investment Banks. So, it helps to see collective accumulation by 7 brokers: Citigroup, Goldman Sachs, Macquarie, Merrill Lynch, J.P. Morgan, Morgan Stanley, UBS.
So, for example, in the screenshot below you can see collective accumulation by clients of these 7 brokers as if it was a single broker servicing all these guys. Because Merrill Lynch clients can be selling, but Citi clients can be buying and I want to see the total trading of these guys to get a better picture.
ConclusionI think that's all that I wanted to share and that I've learned so far. Would be glad to hear an opinion or other ideas for interpretation.
The key patterns for 10-baggers:-Tightly held
- CommSec clients pivot from buying to selling (retail distribution begins)
- New brokers suddenly show interest (coverage initiation)
- Investment bank clients start accumulating (smart money flows in)
- Limited selling pressure from existing holders
What happened next with the price you probably know, but I'll leave that analysis for another day. I'll worry about it when I can more reliably spot growth like this more often
Please, share the post if you like!
This analysis is based on broker data patterns and is for educational purposes. Past performance doesn't guarantee future results. DYOR.
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