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Experts
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 Saxo market strategist Jessica Amir.
There’s been a severe lack of investment in the mining sector for decades now and that is not going to change, Amir says.
“It is also one of the reasons why supply is exceptionally low,” she adds.
“On the other hand, you have this enormous demand push with governments, organisations and consumers – three key pillars – closing the tap on fuel combustions engines, some governments in seven years times and others a little further out than that.”
Amir says Saxo is bullish on battery metals and the three Saxo Bank is keeping watch on are aluminium, copper, and lithium.
“People tend to forget about aluminium, but it is not only essential to the actual shell, it is essential to the battery cell itself,” she says.
“It is responsible for the light weight of an electric vehicle, around 250kgs on average is needed for each EV.
“When it comes to copper, there’s not enough of it to meet demand and the supply demand dynamic is not expected to correct until 2040.
“And with lithium, well it was one of the only secotrs that produced above market profits in the last reporting season.”
Saxo’s mantra is “everything starts with the macro-economic environment”.
“We’re in a high interest rate environment and we heard from the Federal Reserve last week saying interest rates are probably going to keep on rising and will probably rise more than many expect,” Amir says.
“This kind of sets the scene for us and reiterates our preference for large cap stocks because they’ve got the balance sheets to weather the storm.
“Not only that, but companies who are deemed quality with high repeatable cash flows and earnings are typically able to sustain the pressure of high interest rates, whereas smaller companies who are mining and not making money from it, well they are going to be feeling the pinch.”
RIO is one of the world’s biggest suppliers of aluminium.
“Sure, they have a big proportion of revenue form iron ore, but a large amount comes from aluminium (about 30 per cent),” Amir says.
“This is definitely one to watch.”
S32 is a BHP spin off with a large aluminium portfolio.
“Around 54 per cent of their revenue is from aluminium, so more than half,” Amir says.
“Investors should definitely be keeping an eye on this stock.”
“One of the world’s biggest producers of copper,” Amir says.
“BHP makes about 30 per cent of their revenue from copper – or $17 billion.
“When you compare that to the average company on the ASX it’s significant.”
“Albermarle was the first of the major lithium companies to report and they pretty much fired the gun in the air and said that the lithium sector is going to continue on a tear for 2023 and beyond,” Amir explains.
“This company is a proxy for the lithium sector and has contracts with most the EV names that you can think of and see on the street such as Ford, Tesla, Renault, and General Motors – pretty much the majority of EV producers.”
In Australia, Amir says she likes Pilbara Minerals in the lithium space.
“They are a producer here in our own backyard and a first mover in the lithium space in Australia,” she says.
“They have captured some of the market share and kept and retained an offtake agreement with Great Wall Motor, a privately owned Chinese automaker.
“Pilbara Minerals also declared their inaugural dividend – they’ve never paid a dividend before and beat profit expectations, setting the path for a very strong year ahead.”
Experts
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