MoneyTalks is Stockhead’s regular recap of the ASX stocks, sectors and trends that fund managers and analysts are looking at right now.

Today, senior investment manager Adam Dawes at Shaw and Partners talks about his favourite sectors and stock picks for 2021.

Dawes says he’s very positive on the Energy sector, and thinks the oil price has some room to move on the upside despite rising close to US$80/barrel now.

His other top sector picks include uranium, iron ore and telcos.

Oil and gas picks

Woodside Petroleum (ASX:WPL) and Origin Energy (ASX:ORG)

“The reason we’re buying energy at the moment is a little bit contrary to what ESG investors are saying,” Dawes said.

“There hasn’t been a lot of production in new oil fields or projects, so that means demand will be outstripping supply.”

Dawes said demand is still there for fossil fuel with 85% of the world still using it, but supply in the next two to three years is going to dry up.

“The other reason why we’re investing in energy is it’s been the worst performing sector over the past 12 months, so now is a good time to be looking into picking some of that up,” he said.



Uranium stock picks

Paladin Energy (ASX:PDN) and Boss Energy (ASX:BOE)

Dawes is also bullish on uranium stocks, as he reckons asset managers still have more to buy in the physical uranium space.

He explained that the recent spike in uranium prices was due to Sprott Asset Management buying into physical uranium.

“Sprott is a buyer of gold and physical assets, and three months ago they started buying physical uranium in the market, which pushed the uranium commodity price higher,” Dawes told Stockhead.

“As we know, share prices follow commodity prices, so that’s why we’ve seen uranium stocks surging higher.”

“Sprott has now put together a physical uranium trust, and they’re going to buy physical uranium as a store of value.”

“They’re looking to reload capital and start to buy more physical uranium in the next couple of weeks, so that’s going to further help the uranium price.”



Iron ore pick


Dawes said that he’s starting to slowly dip his toe back in for some BHP stocks.

“It’s a little bit contrary to where the iron ore price is at the moment, but a low iron ore price is actually quite good for our majors,” Dawes explained.

He said that big Australian miners can produce a ton of iron ore for around US$15 to US$18 inclusive of dividends, whereas miners in developing regions like Indonesia or Africa could hardly mine them at less than US$100/ton.

“So with iron ore price at US$100 or thereabouts, it takes those marginal producers out of the game,” he said.

“That’s why I’m sort of veering towards buying BHP, but not brave enough to get into Fortescue (ASX:FMG) just yet.”

He said that BHP has a couple of catalysts going into the next year – the first one being that it’s getting rid of the UK listing, and will solely be listed on the ASX.

“This means that all fund managers will have to buy through the Australian market, which will increase volume,” he explained.

“The other tailwind is that they’re diverging their oil and gas business to Woodside in the second half of next year.”




Telcos and funds

Aussie Broadband (ASX:ABB) and Pinnacle Investment (ASX:PNI)

Dawes says he’s also buying into the telco space, and reckons ABB is one of the fastest growing telcos in Australia at the moment.

“Obvoiusly Telstra is the leader in that space, however the company has struggled to maintain market share,” he said.

He’s also switched from the Magellan Global Fund (ASX:MGF), and into Pinnacle Investment.

“Pinnacle has gained some really good fund inflows recently, and we’ve switched into them for quite a while.”




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.

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