MoneyTalks: Trent Primmer sees value in energy stocks and takes a contrarian view towards gold
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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 Trent Primmer, director of trading at Barclay Pearce.
Barclay Pearce have been keeping an eye on broader macro trends such as geopolitical tensions stemming from the Russian-Ukraine conflict, which Primmer says has caused a ‘push and pull’ scenario between the largest superpowers.
“Most companies are clear on how COVID has impacted their business and while China and Japan are still having issues with the virus, for the most part it is back to business as usual,” he explains.
“The energy crisis is still very much a thing with oil and gas supply outpaced by demand and inflation rising to levels we haven’t seen in 40 odd years.”
That said, a lot about this market remains unpredictable.
“It doesn’t make much sense in terms of historical trends and we’re facing some of the biggest issues all at once that we have ever faced in markets historically,” he continues.
“You can’t expect everything to follow the same trends as what they usually have done.”
With that in mind, Primmer says Barclay Pearce are invested in companies leveraged to the wider energy thematic and takes a contrarian view towards gold.
“I know the market hates gold right now but historically, it has always performed well, and it’ll just be a matter of time before everyone cottons on and says, ‘hey it’s cheap, the price should be a lot higher than where it is’.”
“This is where we have parked a large proportion of our funds to get access to the trend in investment towards thermal coal,” Primmer says.
“It is the only pick we have in thermal coal – there is a lot of liquidity through the stock, it has a very large market cap of around $7.5 billion, tiny bit of yield, but we have made roughly 70 to 80 per cent off it since the start of the year.
“A lot of these businesses that are well capitalised with strong balance sheets and relatively low debt are well run and have been around for ages.
“They are part of the furniture so to speak in terms of Aussie infrastructure and will benefit considerably from investors getting exposure to coal.”
As for coal prices, Primmer says they are set to keep on rising.
“Demand is not just going to taper off that quickly in the short term.
“Looking at alternatives to oil and gas, what you’ve got is supplies of oil and gas tapering off around Russia which is negative for the global economy so demand should still continue to outpace supply.”
Primmer says while Santos (ASX:STO) pay a ‘bit of a divvy’ and are leveraged to the strong oil and gas price, his favourite stock in the space is Woodside for its high-quality exposure to LNG.
“Woodside have the strongest exposure to LNG globally and its projects should feed into the energy crisis in Europe.”
While DTR are a smaller-cap stock, Primmer says they are a US-gold developer with around 1 million ounces of gold at 1.2g/t, which underpins their valuation.
DTR’s focus is the Colosseum Gold Mine in East San Bernardino County, California which it acquired from Barrick Gold back in March 2021.
A recent gravity survey at the site has revealed multiple rare earth drill targets, about 1km from the Colosseum open pit, which strikes north-northwest over 2,000m and varies in width between 200m and 450m.
The company believes there’s potential to develop underground access to the target from the base of the Colosseum open pit mine.
“They are capped at around $50 million Aussie and have mining leases just north of Mount Pass, which is the richest rare earth mine in the world and the only operating rare earth mine in the USA.
“To me, this company looks good, and they have just raised capital to expand their drilling program but their strategy for producing gold also looks quite good.”