Money Talks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to hear what’s hot, their top picks, and what they’re looking out for.
Today we hear from Harley Grosser – the founder and managing director of Capital H Management, managing director of ARC Funds Ltd (ASX:ARC), and non-executive director of Motio Ltd (ASX:MXO).
WHAT’S HOT RIGHT NOW?
“Decarbonisation is probably the most important investment thematic today,” Grosser said.
“It is not going away, unlike a lot of other themes that were hot in 2021.
“Decarbonisation is going to be there for our lifetimes and is probably the most important investment theme for the rest of our lives.
“It’s changing the way investors allocate capital and how businesses operate.”
Grosser said there is a big push by governments globally, pouring trillions collectively in spending and incentives whilst regulation sits on the other side forcing it to happen as well.
“In the middle, more and more consumers are supporting the push with their own spending and expectations from companies they buy goods and services from,” he said.
“This is a powerful foundation that can support outsized investment returns from companies which can capitalise and given the many angles driving this theme, it creates a fertile hunting ground for investors.”
TOP DECARBONISATION STOCKS PICKS
THE ENVIRONMENTAL GROUP (ASX:EGL)
“The biggest holding in our portfolio is EGL,” Grosser says.
“We think it’s fundamentally cheap and exposed to the decarbonisation thematic.
“The existing business should do circa $4 million of EBIT this year and it is profitable and growing.
“They also have significant blue-sky growth potential due to a new technology that, following recent successful trials, they are now ready to commercialise, that removes the toxic chemical PFAS from various waste streams.”
PFAS, or Per- and Polyfluoroalkyl Substances, are harmful to human health, yet they are found in a wide range of products and in the environment.
Grosser says EGL ticks all the boxes to be a multi-bagger in 2022.
PROPTECH GROUP (ASX:PTG)
“We have another large position in PropTech Group, a stock that has more than doubled since we invested pre-IPO,” he said.
“They provide the CRM software that real estate agencies rely on at every step of the sales and marketing process and used 2020-2021 to dominate the CRM market.
“Now they have about 40% market share in Australia and New Zealand, more than the next three competitors combined.
“Their next step is to show an ability to cross-sell other products and services to their customers.”
Grosser believes their CRM software is the home base for real estate agencies, and because they own that, there is a massive opportunity to cross-sell ancillary services – including payments, which they are working on now.
“PropTech Group is good value on an ARR multiple basis,” he said.
“They have the real estate majors like Ray White and Raine and Horne as clients, and also as large shareholders, so their interests are aligned.
“We think once they show cross-sell progress in 2022, the stock has further room to re-rate.”
The other major strategy to play the decarbonisation thematic is through primary producers of metals.
JRL has a lithium deposit in the United States, on the Oregon-Nevada border and its scale is almost unparalleled.
“This is a tier 1 asset with tier 1 scale in a good jurisdiction and strategic for the US, which doesn’t produce enough lithium today,” Grosser said.
“An upcoming catalyst for the share price at Jindalee Resources will take place this year when they release an updated scoping study with details on the economics around their deposit.
“We see this as a potential multi-billion dollar project, while the company’s current market cap is only about $150 million.
“With mining projects in the US, you have to be cognizant of the litigation risks (i.e. Lithium Americas Corp), but we are confident that this project can be progressed in a sustainable way and that Jindalee can manage those risks as they push through with permitting and development.
“In mining, it generally pays to back the teams who will be sustainable themselves.”