SUNDAY ROAST: The small caps that lit a fire under Stockhead’s experts this week
Link copied to
It’s been a fine-by-current-standards kind of week for small caps, with the XEC benchmark up 2.19 per cent for the week to Friday.
And especially fine if you consider metals weren’t having a great time of it. Rio Tinto’s giant JV iron ore hope Simandou is under threat from Guinea’s very hands-on military leaders. Copper plumbed 19-month lows. Oil plummeted below $US100bbl.
Gold – six-month lows. And even met coal is coming back to the pack, with spot prices down more than US$200 in the June quarter.
The only winner – uranium. It was up 5.5% in June, and also got a nice surprise on Wednesday when the European Parliament backed EU rules labelling investments in gas and nuclear power plants as climate-friendly.
It’s tough out there. Best leave it to the experts.
Guy Le Page’s pick for the week is gold developer Calidus Resources (ASX:CAI), turned earth in May 2021 at its 100% owned Warrawoona Project in the Pilbara, hit a dollar in April before an aggressive sell-off in gold shares pulled it back to around 60 cents.
Production is ramping up though and the latest drilling hints at extending the current mine life beyond eight years.
Euroz – Hartleys valued Calidus at $1.20/share back in May assuming a gold price tailing off to US$1,700 by 2026 and an exchange rate of 73-74 cents.
“Given the A$ has come off to around 68 cents I think that valuation has, if anything, ticked up a little,” Le Page says.
If you’re looking for an ethical investment that goes out of its way to make a difference, Eddy Sunarto caught up with eInvest’s Associate Investment Analyst, Maddie Huynh. eInvest has developed its own proprietary ESG scoring system that serves as a solution to the “greenwashing” challenges facing the sector.
And it’s keen to make sure companies in its eInvest Better Future Fund (ASX:IMPQ) walk the talk.
“In 2021 for example, following writing to IMPQ holdings that did not have at least 30% women on the board, we saw 10 portfolio companies appoint female Non-Executive Directors to the board,” Huynh says.
In biotechs, Tim Boreham’s caught up with former Carlton AFL defender Simon White and his dicky knees.
After trying everything from stem cells to liposuction, he joined the 400 or so sportspeople getting treated with the reinvented old drug pentosan polysulfate sodium (PPS).
Renamed Zilosul by Paradigm Biopharmaceuticals (ASX:PAR), it’s had a rocky road getting the all-important FDA approval, but is doubling down on the huge cost of another two Phase III trials, half of them in the US, to get the FDA across the line.
Bell Potter says the stakes are huge, worth it: “Zilosul has the potential to become one of the largest selling drugs of all time if the claims of disease modification and pain reduction are met.”
What are the fundies watching? Even in these uncertain times, there’s one thing that populations generally have in common – growth.
As Ashton Reid, portfolio manager at Martin Currie Real Income Fund notes, the more a population grows, the higher the volume of demand for Real Assets serving their everyday needs – especially those with “inflation buffers”.
Transurban Group (ASX:TCL): “Its tolling mechanism is a great example of strong inflation protection that is linked with both the concept of CPI escalation and affordability.
“Every time that drivers hear their tolling transponder beep, that toll will have at least risen by CPI, if not more, from the year prior.”
Global toll road operator Atlas Arteria’s (ASX:ALX) toll price regime also benefits from inflation. The IFM Global Infrastructure Fund (IFM) likes it so much it’s acquired 15.
And pipeline owner APA Group’s (ASX:APA) long-term contracts escalate prices with inflation (mix of Australian and USA CPI). “Therefore,” Ashton note, “APA has strong pricing power and stronger revenue and cashflow growth in a more inflationary environment.”
And finally, one for the chartists, from Australia’s leading technical analyst, Carl Capolingua.
The long-term trend on Betmakers Technology Group (ASX:BET), Capolingua notes, “is a monster”. “And the short-term trend ribbon has terminated rally after rally after rally after… well, you get the picture.”
But the 4 July candle close just pipped the top of the short-term downtrend ribbon and closed at its high. That puts it “very much” on Capolingua’s “turnaround play” radar.
His view: “Bullish, going to wait for more confirmation though before calling it an outright buy, but on my turnaround play radar until a close below the 26 June low of 0.295.”
The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.