Money Talks: Here are Barclay Pearce’s top 2021 ASX picks
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Money Talks is Stockhead’s regular drill down into the ASX stocks, sectors and investment themes that are hot picks with fund managers and analysts.
Today we hear from Trent Primmer, head of trading at Barclay Pearce about his firm’s picks on the ASX for 2021.
Stockhead last spoke with Primmer in August and in addition to some new ideas he also gave us an update on a couple of gold stocks he had previously picked.
Debate has raged between gold bulls and bears about where gold – and by extension ASX gold stocks – remains a hot pick in 2021 and why. Primmer didn’t hide which side of the fence he sat on even with spot prices stagnating in recent weeks.
“Our position with gold as an asset class is it tends to weaken when bond yields are rising,” he explained.
“When people look at lower risk returns they look to bonds. When they rise return you generally see a negative correlation with gold,” he said.
“The bonds markets in general have been pretty volatile in the last couple of months which has had an impact on the gold price.”
“[But] what we see moving forward is gold being well supported due to geopolitical tensions, currency fluctuations, monetary policy, fiscal stimulus and high risk events like the COVID pandemic and the general wellbeing of global economies.”
Since August, this stock has gone on a big run from 2.2 cents to as high as 9.8 cents in late October.
“They announced the discovery of a high grade gold mineralisation at their Gigante Grande prospect and out of their initial 32 hole drill program they got results for five of them,” Primmer explains.
“And they got some spectacular intervals, found in two of those five, and most impressive was peak of 1m at 76.4g/t from 134 metres down the hole which is obviously quite phenomenal.”
The stock has retreated in recent weeks to 4.7 cents yesterday although has still more than doubled in four months. Primmer believes this is due to an over-reaction by the retail market looking at surface drilling only.
“They’re not wasting time digging holes where there’s lower grades of gold, they want to target the ones that present value to them first.
“The gold’s at greater depth, so as they start drilling further down we’re confident, the territory they’re in, they’ll find some very high grade gold.
“We’re still expecting another few results over the next couple of months which we expect the share price to take a nice little run after those [results].”
Kingwest is also focused primarily on gold exploration at the historic Menzies gold fields, 120km north of Kalgoorlie.
The share price has only seen a modest 6 per cent rise in the past four months but a lot more could be to come in 2021.
“Recently they provided operational update to the market; and they expect a significant increase in mineral resource estimates which are based on their 2020 drilling results to date,” Primmer explains.
“Essentially, they’re looking to build on existing near surface JORC resource and continued exploration at Menzies then begin their greenfields exploration at Goongarrie.”
While you’d be hard pressed to find a gold explorer that’s won’t tell you they’re planning more exploration and anticipating good results in 2021, Primmer thinks Kingwest has some things going for it that others may not.
“The gold market is moving into high grade and higher margin mining projects … obviously Kingwest and REZ are some of the high margin mining projects,” he says.
“Menzies itself is one of WA’s original large-scale high grade gold zones and granted mining licences and existing infrastructure essentially allow rapid and low capex production.
“The Goongarrie mine for Kingwest has huge exploration potential – obviously as they go on and release what they’ve explored and start to look at producing, I think KWR – and REZ – are pretty cheap for exploration miners around these levels.
“I think next year will be the year for REZ & KWR.”
After the update, Primmer also gave us three new ASX picks that could be set for a solid 2021.
This tech company, one of the larger on the ASX, develops computer software for design of key components of electrical products as well as printed circuit board components.
Primmer admits there might be some fluctuations in the market but is still backing Altium as a 2021 ASX pick.
“The tech sector is quite hefty at the moment in terms of pricing,” he says.
“So while they will be quite volatile – [when there are] any swings in the market you’ll generally see a sell off in the tech sector because of the P/Es that these stocks trade on – Altium, we think is a complete given, just given sector that it is in.
“They’ve started to focus less on the Chinese market, where there were issues with IP theft.
“And they were focusing a large amount of their time on marketing or converting non-paying clients to paying clients in the Chinese region which they’ve started to not focus on as much given what’s happening between the US and Australia and China with the whole trade war issue.”
Speaking of the trade war, another sector that will shift is rare earths because the US wants to rely less on China for its critical minerals.
The ASX rare earths sector is home to several small and mid cap hopefuls, and then there’s Lynas.
Lynas is in a league of its own being the only big, vertically integrated supplier of rare earths outside of China.
It sends rare earths-rich mineral concentrate from its mine site in Western Australia to Malaysia for processing into saleable rare earth oxide products.
“China produces around 90 per cent of rare earth metals. So I think it could make [rare earths] a key political metal in 2021,” he said.
This stock really needs no introduction as one of the largest ASX stocks and celebrated long term journey from its IPO as a small cap back in 1994.
But there’s a new reason to view it as an ASX pick in 2021.
“They’ve been contracted by the Aussie government to manufacture the COVID-19 vaccines,” Primmer says.
“So it’s obviously a big year next year for CSL as a large player in that field in Australia and one of the largest [ASX] companies by market cap.
“We just see them going strength to strength, [they have a] good balance sheet, well run and good market share.”
At Stockhead, we tell it like it is. While Kingwest Resources is a Stockhead advertiser, it did not sponsor this article.
The views, information, or opinions expressed in the interviews in this article are solely those of the interviewee and do not represent the views of Stockhead.
Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.