Barclay’s bull or Pearce take? Staying in tune with a broken record

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.

This week we reconvened with Barclay’s Head of Trading, Trent Primmer, to get a sense-check of what professional investors are talking about on the ground.

And once again, the conversation turned to resources.

Recent discussions with Primmer have dialled in on stocks to watch in various commodity sub-sectors including nickel, some ASX copper explorers and a stock pick in the green hydrogen space.

Copper is still in focus, with Barclay Pearce working with a number of junior copper explorers in the pre-IPO stage. So were precious metals (gold) and bulk commodities (iron ore).

As Primmer aptly put it: “I probably sound like a broken record at this point, but why change a record when it’s making you money every time you play it?”

Macro view

Iron ore is back below US$200/t and copper has eased back from recent decade-highs of its own.

On the demand-side, Primmer noted this week’s development in China, which he called the “main driver” of the mini-correction.

China’s main economic planning body, the NDRC, this week called regulators in for a chit-chat in a bid to curb market speculation.

“But from where we’re standing, we think it’s a short term down-trend,” Primmer said.

Commodities such as iron ore and copper still have “strategic value”, not just to China but to the world.

“That rising infrastructure spend is a global thematic as economies emerge from the pandemic. It puts people in boots and helps out economies around world,” he said.

“So we think that will continue to underpin demand in these commodities in an environment of constrained supply.”

In that context, Primmer highlighted regulatory developments in Chile, which supplies 25% of global copper.

Lawmakers have proposed a bill which would materially increase the tax on copper sales.

“I think (Chilean copper miner) Codelco said around 40% of copper output is going to be affected if that law gets past,” Primmer said.

Weighing up the various uncertainties, Primmer said that there’s “still going to be a lot of demand which will outrun supply”.

“Copper in particular around these levels we’re happy to buy and hold longer term.”

Follow the money

On the ASX, Primmer again highlighted Chilean-based Hot Chilli (ASX:HCH) as Barclay’s pick of the bunch among junior copper explorers.

“That would be one of our top stocks that we’re watching and also happy to buy,” he said.

And relaying conversations with corporate clients, Primmer said that 2021 has ushered in a material shift away from tech stocks and towards resources among sophisticated and professional investors.

“When a new client calls us, normally we’d be asking them the question about what sectors they want to allocate capital to,” Primmer said.

“Right now, as soon as they call us they’re saying ‘let me know when you have a resources company or a renewable energy company that I can invest in’.”

Barclay’s is currently acting as lead manager for Locksley Resources, a pre-IPO copper play developing a greenfield asset located in Central NSW.

“All of our pre-IPO rounds in resources are getting oversubscribed pretty fast. I think the Locksley raise was oversubscribed in a couple of hours.

“Some of these guys are throwing big money at these companies, even at the pre-IPO phase,” he added.

“And anytime to a new client they’ve already taken notice of what we’ve done in the renewable energy resources space.

“Conversely, they don’t really care about the next growth stock in tech at the, given the recent drop-off in tech prices.”

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.

At Stockhead, we tell it like it is. While Hot Chili is a Stockhead advertiser, it did not sponsor this article.