MoneyTalks: Living in the '70s with three picks to beat inflation

MoneyTalks 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 Peak Asset Management founder and executive director Niv Dagan.

What’s Hot

Dagan said with the hawkish sentiment around interest rates globally and in the US maybe it’s time to start looking to the ’70s for investing inspiration. US Federal Reserve Chair Jerome Powell on Friday made it clear he won’t be backing down in the fight against high inflation.

In a closely watched speech at the Fed’s annual conference in Wyoming, Powell said the central bank will do what it takes to rein in prices, foreshadowing not only further interest rate increases but also warning rates may stay high for some time to ensure price spikes do not persist.

“The recent comments by Jerome Powell, stating that the US Federal reserve will do whatever it takes to bring down inflation, even if it means raising interest rates above analyst expectations, has certainly put a damp on global markets, Dagan told Stockhead.

“The unusual drivers of the global outbreak of inflation at levels not seen since the 1970s, makes it likely that the Fed will have to raise rates to levels the markets definitely weren’t pricing in and keep them there for a lot longer than investors expected if it is to drive the inflation rate down.”

Top Picks

Dagan said given talk about persistent inflation and higher interest rates, Peak is only focusing on three sectors during the 1970s which outperformed others including:

Oil & Natural Gas – Bass Oil (ASX:BAS)

Leading into the European winter, natural gas prices recently topped $3100 per 1000 cubic metres, a 610% increase over the same time last year as measured by the Dutch TTF market. Dagan said at this price, many power stations cannot afford to operate for long.

“As a consequence of the rising cost of input fuels, benchmark electricity prices in Europe have surged almost 300% in 2022, breaking records. Taken together, energy prices are 10 times higher than the five-year average,” he said.

His top pick for the oil and gas sector is Bass Oil.

“At only a market cap of ~$9m Bass oil recently completed its Cooper Basin acquisition, which is expected to see daily production exceed 300 bopd,” he said.

“What other junior oil companies are driving more cash flows than their entire market cap? What makes it really exciting is that the company has a prospect of over 24 BCF of gas and has recently completed mapping and we’re expecting drilling to commence Q4.”

Commodities – BBX Minerals (ASX:BBX)

Dagan said Peak’s preference remains with future facing metals lithium, copper and PGEs. The company’s top pick in the sector is BBX Minerals, which continues to report assay results of continuous mineralisation.

“The company is working towards a JORC resource and with PGM grades of 2M at 6.90g/t and 24.16M at 2.21g/t 5E PGMs, if we compare these to Galileo Mining (ASX:GAL), Podium Minerals (ASX:POD) and Conico (ASX:CNJ) we feel that the company should be re-rated by the market, leading into assays and JORC,” he said.

Uranium – T92 Uranium (ASX:T92)

As Stockhead’s Reuben Adams pointed out on Tuesday uranium stocks are flying again, or were, on that day. According to Dagan the world needs uranium.

“Uranium is trending as a way to fuel electricity and in turn, the rise in electricity use is fueling the demand for nuclear power and uranium,” he said.

Dagan said investors see the demand for a product or service as a sign to invest for the potential to earn a profit.

“According to Cameco (NYSE:CCJ), one of the world’s largest uranium producers, global power demand is expected to grow 75% by 2050,” he said.

“Further to this, according to the World Nuclear Association (WNA), the world’s current nuclear reactors require 74,000 tonnes of U3O8 (uranium oxide) each year.”

With spot uranium prices expected to rise, T92 Uranium (T92: ASX) is due to list on the ASX in the next two weeks. Peak is the lead manager and its largest shareholder.

“With an exceptional board, including the ex CEO of Cameco Darryl Clark, ex head of operations for Nexgen Energy (ASX:NXG) Troy Boijoli, founder of Alligator Energy (ASX:AGE) Andrew Vigar and previous head of operations for Cameco, Mike McLelland, it has built an all-star board,” Dagan said.

“T92 is looking for ‘elephants’ in Canada’s Athabasca – aiming for deposits >200M pounds and grades >5%.

“To put things in perspective, BHP’s Olympic Dam only has grades ~0.003%.”

The company has three 100% owned projects and will be drill-ready by the end of the year.

“With an Enterprise Value of only $2.3m on listing, we are extremely excited by this IPO,” Dagan said.