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 trading platform Stake ASX equities analyst Dylan Zhang.

What’s hot right now?

In November, Stake saw a 19% increase in buys compared to the previous month which Zhang said was primarily driven by better-than-expected consumer price index reports in the US and Australia, and the subsequent rally that followed.

Zhang said meanwhile, the BetaShares Australian Equities Strong Bear Hedge Fund (ASX:BBOZ) which investors have used to seek returns during market pullbacks, saw a 53% reduction in buy activity on Stake in November as investors anticipate more growth.

He said signs currently point to a peak RBA cash rate of 4% in 2023, but there is still lots of uncertainty. For instance, the news of China’s easing lockdowns could help to reduce supply-side inflation in 2023, but the extent of this new policy is yet to be seen.

“If we do see this come into play, we can expect energy and commodity stocks to benefit,” he said.

“This could also have a positive impact on the Aussie dollar, with China being Australia’s largest trading partner.”

He said the sentiment is being reflected by Stake investors. Lithium stocks remain popular, with Pilbara Minerals (ASX:PLS) and Core Lithium (ASX:CXO) seeing some of the biggest inflows.

But ASX green energy stocks outside lithium are also starting to gain momentum.

Here are some Stake noticed gathering pace, across a range of market caps.

Top Picks

Origin Energy (ORG)

The large cap received its takeover bid from Brookfield and EIG partners on November 10, valuing its shares at a 60.6% premium to its one-month volume weighted average of $5.60.

The bid saw ORG boom, leading to YTD gains of more than 34%. It has a market cap of ~$12.39 billion.

“Takeover aside, Origin Energy has some promising projects spanning wind, solar and hydro in the works,” he said.

“Notable examples include the 60MW Yanco Solar Farm project that was acquired in early August 2022, plus the Carisbrook Solar Farm — a planned 90MW project located in central Victoria.”

“While investment banks including JPMorgan, UBS and MUFG are currently working with the buyers of Brookfield and EIG Partners to help with the funding and structure of the deal, there is uncertainty from the Federal Government’s sudden energy price cap proposal, which could reduce Origin’s annual revenue by $40 to $60 million, and limit its energy supply business,” Zhang said.

“If the deal does go through at a price of $9 as laid out in its non-binding offer, there is still around 15% of potential upside based on the current price.”

However, details of the Federal Government’s plans are still emerging making the situation unclear.

“If it does succeed this acquisition would help Origin navigate its renewable energy transition faster than competitors to reach its net zero goals by 2050 or possibly earlier.”

Paladin (PDN)

Zhang said as the worldwide energy crisis rages on, interest in the nuclear industry has been revived.

“After a decade of drawing on inventories, utility firms are opening new contracts to balance the market,” he said.

And with Australia sitting on the world’s largest proven uranium reserves, Stake ASX investors are going straight to the source.

“Paladin Energy is the biggest pure play uranium stock on the ASX, making it popular for those looking for a slice of yellowcake,” Zhang said.

“It plans to restart its Langer Heinrich mine in Namibia on the back of increased uranium prices with first production targeted for early 2024.

“This tier one asset already has a 10-year track record and could produce over 76 million pounds of uranium in the future.”

Zhang said it’s also a relatively low risk project given its existing offtake agreements to North American and Chinese power firms.

PDN stock is down more than 15% over the past year as revenues remain negative and has a market cap of ~$2.04 billion but Zhang said some see this as a good entry point.

“Several analysts have concluded that uranium prices of around US$60/lb are needed for more operations to be profitable, and this is an obvious headwind for uranium miners,” he said.

“However, those that are closest to reaching production will be in the best position to cash-in if the price does eventually rise.”

Peninsula Energy (PEN)

Zhang said in the small caps sector, uranium miner Peninsula Energy has attracted an increasing amount of interest from Stake investors over the past month.

He said this followed the completion of a $32m placement to restart uranium production at its Lance project in the US state of Wyoming.

“The asset’s location means Peninsula could be well placed to take advantage of the Inflation Reduction Act, which has reinforced uranium’s role in the US carbon transition,” he said.

“Peninsula has signalled production at the Lance project to resume in Q1 2023, and the company reports holding long term contracts to supply up to 4.8mlbs to the US and Europe, stretching to 2030.”

Zhang said that said, given the low market cap of ~$155 million, it is undoubtedly one of the riskier options, and share dilution has left many long-term Peninsula investors at a loss.

“Several analysts are expecting the company to reach profitability in 2025, but it’s important to do your own research and only invest in line with your risk profile.”


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