Barry FitzGerald: These are the top 10 stocks expected to make big gains in 2020
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Last year’s thumping 18.3 per cent gain in the Australian market (S&P/ASX200) has got investors wondering where they might be able to bag some big gains in 2020.
Selective investment in the resources could be the answer, judging by the latest ranking from top to bottom by Credit Suisse of its share price targets for the broad sweep of ASX-listed companies.
Its top 10 is dominated by resources companies. They take out nine of the top 10 positions, and have projected price targets/total return gains ranging from 37 per cent to 293 per cent.
Based on share prices as of January 16, the number one position was comfortably taken out by New Century Resources (ASX:NCZ), with a projected return of 293 per cent.
Now trading at 28c, the price target on the stock is $1.
Now it should be said Credit Suisse has been a fan of the Century zinc producer for a long time, having set target prices previously at much higher levels.
Its target price on the stock in June last year was set at $1.53. It was trading at 49c at the time.
The weakness in the share price — and the need for Credit Suisse to reset its target price — reflects shortcomings in New Century achieving the targets it set itself when it flicked the switch on its tailings retreatment operation at Century.
But like others in the market, Credit Suisse is obviously confident that the worst is behind the stock and that as the Century operation hits its production targets (and the zinc price holds together), there is a big re-rating on the cards for New Century.
The following list covers the remaining eight resources stocks in Credit Suisse’s top 10, and the one industrial, and some commentary from Garimpeiro on why they get a guernsey.
Garimpeiro also undertakes to review at year-end how the nine resources companies in the top 10 went.
No.2 FAR Ltd (ASX:FAR): The projected gain is 138 per cent as the junior oil play sets about securing financing for its share of the Sangomar oil development offshore Senegal in a joint venture with Woodside.
No.3 Syrah Resources (ASX:SYR): The projected gain is 111 per cent, reflecting the expectation that the graphite market will have a better 2020.
No.4 Coronado Global Resources (ASX:CRN): Tipped for an 84 per cent gain on expectations the dividend-paying coal company will benefit from improved coal prices, and a recovery from some recent operational challenges.
No.5 Pilbara Minerals (ASX:PLS): Credit Suisse tips a 71 per cent gain. The lithium market looks to have bottomed, with the price shakedown curtailing new developments/expansions to the benefit of incumbent producers like Pilbara Minerals.
No.6 OceanaGold (ASX:OGC): The forecast gain is 71 per cent. There is a feeling that the gold producer has been over-sold in response to its woes at Didipio in the Philippines.
No.7 Life360 (ASX:360): Not a resources company, but gets into the top 10 on the strength of a projected gain of 61 per cent. It’s in the information technology space, we think.
No.8 Strike Energy (ASX:STX): Tipped for a 51 per cent gain. It is plugged into the high-priced East Coast gas market and notched up a game changer discovery in the Perth Basin.
No.9 Galaxy Resources (ASX:GXY): Credit Suisse has it down for a potential 48 per cent gain. Another lithium market recovery story.
No.10 Whitehaven Coal (ASX:WHC): The coal producer rounds out the top 10 with a projected gain of 37 per cent. Improved coal prices and recovery from some recent production issues is on the cards.
So that’s the top 10, what about the bottom 10? Independence Group (ASX:IGO) is there with a -29 per cent projected return, OZ Minerals (ASX:OZL) is -25 per cent, and Fortescue cops a -23 per cent outlook.
All three were strong performers in 2019.
The outlook for Independence has become tainted by a more sedate performance than expected by the nickel price.
Nervousness about the ramp-up at OZ’s Carrapateena development is worrying some, while Fortescue’s stellar 2019 run is vulnerable to any iron ore price weakness.
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