Barclay’s bull or Pearce take? Nickel stock picks and tech drop kicks

Each Friday, corporate advisory firm Barclay Pearce highlights the key trading themes of the week, along with which companies and sectors Stockhead readers should be keeping their eye on.

The ASX is holding above 7,000 and IPO activity remains lively, but tech stocks are officially on the nose.

And for Trent Primmer, Head of Trading at Barclay Pearce, the key momentum shifts on markets this week reflect a consolidation of recent trends; the commodity cycle is in full swing, while post-COVID capital flows into high-growth tech are now receding.

“It’s good to see that trend continuing through the conversations we’ve been having,” Primmer said.

He described the commodities cycle as a “logical investment theme”, as multiple post-COVID tailwinds spur activity on the demand side following a period of under-investment in supply.

“It’s almost like a lag effect as investors move into these commodity themes,” Primmer said.

“If you go back a year ago, we knew there was going to be big budget spending on infrastructure.”

“And I think in Australia the way we tend to get out of problems with the economy is through our commodity markets, which is the main reason we didn’t have a recessionary period in the (2008) financial crisis.”

Meanwhile, the key post-COVID drivers of tech — such as rock-bottom interest rates and changes to living patterns in the absence of a vaccine — are starting to recede.

Primmer said surging valuations have left the sector “overpriced”.

“I think it’s a sign of risk in the sector when any market jitters are causing these tech names to sell off so rapidly,” he said.

BNPL leader Afterpay (ASX:APT) closed below $100 yesterday for the first time since December, while market darling Appen (ASX:APX) is back below $12 for the first time since 2018.

“It’s a risk you don’t necessarily want to be taking as an investor, and I’d favour a portfolio geared towards commodities in this kind of market,” Primmer said.

Stock picks

Speaking of commodities, after highlighting some junior copper explorers last week, Primmer turned his attention to the nickel space.

A key input in the electric vehicle thematic, nickel prices have broken through $US17,000 per tonne following a sharp fall in February.

Tying those broader sector tailwinds to an improved risk/reward ratio for ASX small cap, Primmer highlighted two junior nickel explorers — Mincor Resources (ASX:MCR) and Poseidon Nickel (ASX:POS) — that should be on the investor radar.

“If you look at POS in particular that’s a stock with a fairly low entry price. So if an explorer like that gets any significant finds, they have the potential to rally strongly on the back of this broader commodities strength,” he said.

“So I think that makes for a good low-cost entry point to the space if you want to add some more speculative bets to the portfolio.”

Chart of the week

Lastly, while he has no strong opinions on the direction of crypto assets, Primmer said he’d be remiss if he didn’t at least mention the 2021 Dogecoin extravaganza.

Adding to the intrigue, Stockhead’s Derek Rose reported yesterday that wallet data suggests one Doge whale owns almost 30pc of all the coins on issue (worth $US28bn).

Why is it worth $US28bn? Because Dogecoin has climbed by around 14,000 per cent, just in 2021 alone.

At Stockhead we’re prone to using the phrase “eye-watering” to describe big stock gains, but in this case it’s fairly apt.

To close out this week’s Barclay’s Bull, here’s what the Doge rally looks like in chart form (six-month):

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.