ShareHub Hotlist 2019 Review – Week 36

The William Hill St Leger Festival kicks off today and it officially marks the end of the summer malaise and a return back to the desks for many traders, city suits, ‘real workers’ and of course company directors, some of which make a summer holiday look like it lasts all year round! Some will be replenished by the release of stress. Some sporting tans that look more orange than they should and there are those that look positively grumpy at the idea the Autumn season is upon us. Whether seasonal blues or just emotional headaches from watching England perform houdini type acts during the Ashes, it’s time to refocus minds on investments/folio’s and what lies ahead for the rest of the year.

Markets have improved of late and it’s a puzzle as to why as China / US talks are none the closer. Brexit is still heading for an inevitable extension and UK politics is heading for a rude awakening should MP’s decide on another election. ‘Fed up’ or ‘cheesed off’ is the best way to describe the self protectionist Tory government, Labour and just about any other party around today. Charged with delivering the ‘peoples’ Brexit… and they end up delivering zero. Over 3 years (yes 3 years!) have been wasted. Now, your average degree student could be guilty of wasting year 1 out of 3 while they adjust to laundrette chores, learning to feed themselves and discovering hangover cures. But by year 2 they have knuckled down and year 3 they have graduated albeit with a debt mountain behind them. UK Politicians (and EU included) have thus far achieved nothing in 3 years. It’s just been one long bender. How many airmiles notched up? How many volovants swallowed? And at what cost to the public? Do we have a figure on it yet Mr Javid? Would you care to disclose it? It has been a disgrace and what’s worst, some are now talking about holding another referendum! Rinse and repeat? Oh please… noooo!

Moving on…

Week 36 Review:

TheShareHUB picks bounced back strongly over the summer weeks and now leads the pack. Commodity focused stocks do tend to suffer more during the summer weeks so this bounce back comes as a bit of a surprise especially against an apparent weak global growth backdrop. Across the top ten picks, Gold’s resurgence has certainly helped Hummingbird Resources fight back from the abyss. Should ops deliver as management hope, the company should be back to where they were 18 months ago. Weather permitting! Elsewhere, it’s good to see CERP finally showing some strength after a benign or stagnant first half. Investors are keen to see a well spud on the SWP and news of a South American acquisition is long overdue. Patience is a virtue (as they say). Which aptly applies to Amerisur Resources too… in offer talks with multiple interested parties and not a peep from them in months! The company is expected to deliver interims tomorrow, so investors might get something to chew on around then. That said, 6 months is the norm for acquisitions these days so AMER have until Dec 31st to get it all agreed which would tie in nicely with some management options that are due to expire. Nothing like a good old self imposed incentive to drive management forwards! SXX continues to recover but looks down and out for 2019 based on recent equity dilution. Wishbone much the same. Both have been very disappointing. SOLG continues to perplex investors as it builds on its huge resources. Concerns over funding usually emerge around now so that might be one reason for the poor share price performance of late. Finally, Petra Diamonds looks priced for liquidation. How on earth the market can adopt such an early negative view is beyond comprehension. The company has 3+ years to deliver on the self imposed 2022 project plan with debt reduction targets ranging from $150m to $210m. The Diamond market is struggling at present, but that’s been the case for the last 3 years. At somepoint, it should flatten out and even begin bouncing back. Petra Diamonds are cited to report on September 16th and investors should expect a confident statement from the CEO delivered by solid numbers if past RNS statements are to be followed. Hit the right tone and spot and the share price could be doubling fast from 8p lows and still look cheap!

Saddle up, plenty of jumps, hurdles and escape tricks required before this year is out as nothing is ‘uneventful’ these days with Mr Trump tweeting without parental guidance locks on.

TheShareHUB top picks 2019 – week 36
Guardian top picks 2019 – week 36
TheIndependent top picks 2019 – week 36

ShareHub Hotlist 2019 Review – Week 30

A good couple of weeks for TheShareHUB picks as Amerisur Resources and Hummingbird put in solid recoveries from lows. Unfortunately, there’s always one that spoils the party of late and that one happens to be Petra Diamonds. The old adage that ‘Diamonds are forever’ is beginning to wear thin. It seems society today places less value on the once highly desired stones and instead prefers to focus on more important things in life like Holidays, Mortgages and School fees! Never before has the Diamond market looked so over supplied and weak. Data from Anglo American (owners of De Beers) paints a very sad picture of an industry that used to pride itself on its long lasting lure and sparkle. The problem for the small stone market is how to justify and maintain a value for diamonds if the higher volumes flood the market? It’s a fine art. Rolex are a prime example of how to support your pricing against weak demand. They simply cut supply. Reduce manufacturing or buy back some models. They invest heavily in sports advertising. They manage to convey a desirable but practical consumer message. In retail terms, it’s hard to tell the difference between a £10k diamond and a £5k diamond. Size is not everything. Purety and colour often wins the value game. But here’s the problem… the generations today do not buy into the same quality codes that the generation went on before. Couples are opting for £10k deposits (or contributions…) on the housing ladder and a cheap crystal ring that looks and sparkles the same as the real gem it copies. The view is they will buy a ‘real’ diamond once they can afford one. Then comes the kids and that gets postponed. Then comes the school fees. And so on. Of course this is a small part of the market and as carat sizes increase so does the variation in type of customer. In summary, everything has got more expensive for young couples and those in mid life. Many can’t justify the cost of Diamonds against more important top purchases. This isn’t just about Diamonds. It’s also about the car industry. Premium Car Brands are struggling to lure young buyers in. Instead, many are opting for cheaper more practical and affordable alternatives. The days of the hot hatch are fading. So in this changing world how does the likes of Petra cope with tough market conditions? Well, the CEO Mr Duffy has chosen to reduce capex and set a FCF target of $50m to $70m per year. Based on their debt pile of $528m, it will take through to 2022 before the debt pile reduces to $300m. At this point, some debt may require renegotiation and that’s not unusual. But that’s a long way off and the market for Diamonds is uncertain. Which is why Petra has been trading at all time lows. Investors do not know which way to turn. Bullish or Bearish? At 12p a share, Petra has lost 70% of its value in 2019. That’s after the stock halved from 79p to 38p in 2018. It would appear that the worst possible outcome is already priced in. The trouble is, it’s impossible to forecast. The Diamond market is into unchartered waters. And so is Petra. No one saw this coming. There is some hope on the horizon with US / China trade talks set to recommence. Should Trump/ China agree a deal, then that in turn could drive confidence in the retail and business sector which results in higher Diamond demand. For now, the jury is out on Petra. And it might take a quarter or two before the market sees signs of stability and life in the precious stone market.

Moving onto other more in demand precious commodities, Gold and OIL are beginning to shine again. As the ShareHUB has suggested on numerous occasions, the Oil market and speculators within it are taking a complacent view at present. Issues with Iran (tankergate) would normally see a $10pb premium added in. As would flaky numbers from US production which quite frankly have been flakier than a chocolate flake for sometime now. Rig count dropping. US production dropping. Strait of Hormuz issues. How on earth Oil is not trading at $75pb (Brent) is anyones guess. Give it time, the market will catch up eventually.

Gold continues to shine. You couldn’t find a buyer a year ago with prices at 1180oz. Now it’s in high demand driven buy weaker bond yields. Money is not likely to flood out yet while the FED Reserve remain dovish. US rate cuts are eagerly awaited by the markets and whilst some would like a 0.5pt cut, it looks like 0.25pts is more likely. Had they waited until September, then perhaps a 0.5pt cut would have been possible. Cutting in July looks a tad early but politically it might help Trump and China talks. The Fed Rate decision takes place today.

Finally, saving the best to last, Amerisur Resources have raised the For Sale flag. Management have already rejected the 17p initial offer which is a bullish message to the market. Multiple buyers/parties are involved in talks so it could take sometime for the advisors to strip out the pretenders from the real contenders. The latter are expected to be OXY, ONGC, GEO PARK and GTE. Amerisur Resources folio of assets is an interesting one. All based in Colombia (with exception of Paraguay) they already feature partners OXY and ONGC. Key infrastructure assets such as the OBA (pipeline to Ecuador) are crucial to the economic story on assets in the south. CPO-5 is seen as a bit of a standalone asset towards the north which AMER holds a 30% stake in with ONGC holding the operatorship. Finding a buyer that wants the entire folio may be tricky. Finding a buyer for individual assets could be the way to go in terms of gaining maximum return to shareholders. Whether that will be all cash or part cash and shares remains to be seen. The majority of II’s involved with AMER would naturally lean towards an all cash offer. If this is the case then it becomes more likely that ONGC, GEO PARK and OXY will make the final bidding rounds. Of course there could be a complete outsider that enters the end game out of the blue but until bids above 17p are announced, it’s all about keeping a straight poker face. Interest in Colombia has shot up of late driven by issues in Iraq, Iran and Africa.

If ever there was a good time to sell up, now is it. This is not a desperate forced sale. Amerisur management are nicely positioned with huge exit bonuses. Which is why a deal will be done. TheShareHUB predicts winning bids will amount to over 26p. But in today’s much sought after Colombian E&P sector, that price could rise as high as 35p. For now, the starting bid is in at half the top price. So long way to go to get there.

Fingers crossed… again!

Independent top picks for 2019 – week 30
Guardian top picks for 2019 – week 30
ShareHUB top picks for 2019 – week 30

ShareHub Hotlist 2019 Review – Week 28

Forget Technical Analysis. Forget Research. It’s official – if you cross your fingers and toes, close your eyes and say please please please… then you really can change your fortunes and determine results. That’s all nonsense of course… but it worked for me during England’s last over of the ICC World cup. It appeared to work for Djokovic too although no luck was needed there, just pure will power and nerves of steel. The truth is, there is a place for ‘luck’ in the stock market. The key is to make sure you don’t rely on it! Because everyone knows, you’ll get lucky once or twice but most of the time you’ll be unlucky. And that’s why the spread bet firms and CFD providers make good money. Research from IG recently showed that nearly 82% of customers lost money. The likes of super fund manager Neil Woodford is a prime example of how the best can soon become the worst. The reality is the Market has a habit of leveling things out if you stick around for too long or become complacent. So if you’ve nailed a few winners of late, ask yourself if your strategy is working or whether you just got lucky? If it’s the former, you’re doing well. If it’s the latter, then you might want to take a break.

Week 28 Review:

As we are now in full summer mode, TheShareHUB has moved to fortnightly updates and will be returning to weekly updates after St Leger Day.

The newspaper picks were a country mile ahead of TheShareHUB top ten but after a few good recoveries by a number of ShareHUB picks, the positions thus far are now very tight indeed. And the best bit… The ShareHUB picks have plenty of strong news catalysts awaiting around the corner. MATD, CERP, AMER, and PMO all have big summer drills coming up. Add to this the recent heads up call on i3 Energy with 3 x back to back summer drills due to kick off in under 2 or 3 weeks, and that’s some summer blockbuster line up to look forward to. But as with all exploration and even appraisal drilling, all will need a good slice of luck and in some cases nerves of steel!

Stock coverage/updates will follow, as and when key news events unfold.

Independent Top picks 2019 – week 28
ShareHUB Top picks 2019 – week 28
Guardian Top picks 2019 – week 28

ShareHub Hotlist 2019 Review – Week 26

Week 26 ended with most market moving action taking place over the weekend at the G20 meeting. The usual rubbing of shoulders took place as Saudi’s shook hands with Russians, Chinese shook hands with Trump and Trump shook hands with North Korea. Lots of hand shaking but the truth is that’s all its been for months and months now. OPEC+ confirmed another 9 month extension which brings the cut in production levels towards its 3rd year. How many years need to pass before the ‘reduced quota’ becomes the norm? The reality is, the cuts have helped but they haven’t boosted Oil prices past $70pb which is where the Saudi’s desperately need pricing ahead of their planned Saudi Aramco IPO. The latter has been postponed several times now and keeps the likes of JPM and Goldman Sachs champing at the bit. But there is talk now that it’s back on the table.

Elsewhere in the world of US oil production (on another planet), data releases continue to defy belief. One week numbers are inline or as expected and the next a sudden 12m+ Draw arrives. It’s as if they thought they would fiddle around for a month delivering Build numbers week upon week before finally being forced to tidy up the book and slip all the Draws into one release. Investors would be wise to ignore the weekly reports and concentrate on the monthly data. Investors should also pay attention to the US production figures which were at 12.3mboepd a few weeks ago delivering significant growth from last years 10.9mboepd. But look a little closer and you’ll see that US Production has been falling. Last weeks data showed US Production falling to 12.1mboepd. This brings growth to a standstill. The last time US production was breaking 12.1mboepd was end of Feb 2019. A quarter of 2019 has past and US Production has gone no where fast. This may change, but after the significant growth phase through 2018, growth has become sluggish at best. This correlates with US rig count data which shows a significant drop in rigs over the last quarter. With OPEC+ Supply cuts set for another 9months, there’s not much room in the market for further drops in US Production. With Brent trading at $62.5pb, that’s asking for trouble if the market is net short. Do not be surprised if you see Oil prices head past $75pb (Brent) in Q3. There’s certainly not much of an argument for Oil prices to be lower than $60pb (Brent) especially with US Fed rate cuts anticipated around the corner.

Week 26 Review: The Independent and Guardian top picks continue to bat it out. Markets are at all time highs yet many stocks still seem sluggish especially across commodities. When the sun shines, risk assets become less attractive and money tends to flood to safer havens like Gold. That said, due to unattractive Bond yields, money is being forced into some riskier trades with crypto’s back in vogue. Crypto’s v Bonds? It’s like Nick Kyrgios v Tim Henman.

TheShareHUB picks are still flatlining awaiting key summer drill catalysts to get the juices flowing. Stocks like MATD, CERP and AMER are all expected to drill potentially transformational wells this summer. TheShareHUB’s recent heads up pick I3 Energy (I3E) is also another hot summer pick with 3 key drills planned over a busy 90 day period starting with the first well due to spud end of July or early August. Finally, watch out for PetraDiamonds Full year results due out in 3rd week of July. The stock has struggled to regain some impetus and momentum since completing their refinancing/rights issue last year at 41p a share. Trading today at 19.2p, the stock is a significant distance from Goldman’s Sach’s recent Buy rec and Target of 32p. In June, the CEO bought stock at 21p which was seen as a strong signal ahead of July results. The small sized diamond market has been under pressure from oversupply and lower pricing but Petra is a little different in that they have moved away from smaller diamonds and have targeted the larger sized stones and had recent success with some whoppers this year. Whilst largely historic, results will put a line under 2018/2019 trading year and the market will be keen to see guidance for 2019/2020 outlined from the new CEO with a view on reducing debt being top of the priority list.

Roll on next week.

Independent top picks 2019 – week 26
Guardian top picks 2019 – week 26
ShareHUB top picks 2019 – week 26

ShareHub Hotlist 2019 Review – Week 25

A significant run on Gold prices has given many smallcaps and mid tier gold producers a bit of renewed interest after a period of neglect. Crypto’s are also back in demand which is unusual as many market pundits had written them off months ago. It seems a resurgence in the neglected is upon us. It sometimes pays to keep your head down avoid the limelight and hope all has been forgotten when it comes to past disasters or bubbles bursting. It tends to allow for the initial recovery phase to go unnoticed. A tactic equally beneficial and often used by ‘has-beens’ to relaunch careers? Certainly something Boris seems to be deploying of late. Every word that seems to come out of the man’s mouth forms some kind of overpromise or headline that you know will never be met. That’s the trend with Mr Johnson. He says a lot but actually delivers zero. Heathrow? Brexit bus adverts? Foreign policy? The very fact that the Conservative party have arrived at a situation whereby Mr Johnson is their leading prospect just about seals the deal and places the last heavy nail in a political party coffin that needed banging in a year ago. Brexit has exposed all that is wrong with UK politics. It’s a sad story and Boris is far from being a fresh face with new ideas. He’s just a continuation of the same old, same old establishment that has thus far got us no where fast. Not only did the Conservatives come up with the idea of Brexit, they then fumbled their way through delivering the basics. Remarkably, the Markets seem to have become punch drunk to risk events and seem to be complacent with what awaits around the corner. Brexit has more unknowns attached to it than an MP’s expense account.

It’s time for change. And the biggest problem is that Labour under Corbyn are certainly not the answer. In fact, the answer is ‘no-party’. None of them are fit for purpose. Now is the time to look at a different model. A different electoral system would be a start. More ‘people voting’ processes now technology is advanced enough. Who knows, policy’s could be voted up or down and beamed live across the country in a Britains got talent style format? Sarcasm aside, we do need to relook at the electoral system and how the country is currently run. It’s been a shambles. Even as we head into the summer months, MP’s are booking their vacation breaks. It’s diabolical. I don’t think Mr Churchill went on a weeks jolly to Magaluf while the country was in dire straits.

Moving on… Week 25 was a record breaker for the DOW hitting new highs on rate cut optimism and better vibes from China trade talks.

The ShareHUB top picks were boosted from SOLG’s news that a peoples case seeking a referendum to ban mining in specific regions of Ecuador was struck out. SOLG rose from 28p to 37p before cooling off a little. Another fillip came via Hummingbird Resources which has bounced strongly with higher Gold prices moving from 13p to 18.75p. Heading in the opposite direction are SXX. The stock was 24p 3 months ago but is now trading at 14p after hefty fundraisers. Petra Diamonds continues to tip toe its way back to a recovery level in the mid 20’s. At present the stock is lacking in catalysts and requires a good results update and successful June sales tender to get new investors interested. At 20.4p, Goldman’s recent 32p price target is over 50% away. If or when the good news flows, PDL should be moving back to high 20’s / early 30’s. The second half of 2019 is expected to be especially strong for Petra, so the worst really should be behind them now. Another slow burner is CERP. Investors still await confirmation of the company’s summer drill plans. If or when this gets communicated properly, interest should grow and the share price will take care of itself. Finally, Amerisur Resources seems like it is stuck in quicksand. Despite the company making production gains, the exploration drillbit has been a let down. The market has virtually written off the Occidental deal as an event for next year. Success at Indico-2 (the next well in the drill plan) is much needed. It is an appraisal well, so the odds on finding oil are almost a given (although this still carries operational risks and mechanically, things can go wrong and they often do). The question the market wants to know is how large is the oil column, where is the OWC and at what rate does it flow? Gaining key data like this is essential to determining the resource size and agreeing the final field development plan which like many things operationally… requires significant capital expenditure. That said, AMER’s 30% stake means they should be able to pay their way providing their partner ONGC does not accelerate the infrastructure works (pipes/roads) and development plan too fast. Being onshore, each development well pays back on capex very quickly which is a bonus to a small player like AMER. However to an Indian national oil company like ONGC, they need not tread carefully on a financial basis and may step up the pace to a ‘oil major’ level if they like what they see from future drills over the next 6 months. That could place pressure on AMER’s cash resources and may explain the rather stagnant share price of late. Roll on week 26! Plenty of catalysts await in H2.

TheIndependent top picks 2019 – week 25
TheGuardian top picks 2019 – week 25
TheShareHUB top picks 2019 – week 25

ShareHub Hotlist 2019 Review – Week 24

Week 24 and the DOW is nearing all time highs again. And that’s without a firm China Trade deal signed…. yet. The market is certainly getting excitable again. After several rinse and repeats from 26500 down to 24000 levels, the 10% DOW swing is becoming the new monthly bet. Go back a decade or two and you’ll find a 10% gain on the DOW would normally take or be expected to take, about 2 to 3 years. In this casino, it can happen in just a few days. The main contributor to the markets new verve has more to do with rate cuts and stimulus than China Trade solutions. A few weeks ago, the FED Reserve moved to a more dovish/rate cut friendly position and whilst that is by no means nailed on, the recent poor US job data combined with a global trend to cut rates, has now significantly raised the odds on a US rate cut happening possibly as early as October 2019. Super Mario has always said he will do whatever it takes to keep a solid base under EU financials. Repeating this message should not come as a surprise yet this market seems to react to old news like it was new news. Someone needs to recalibrate those algo bots!

The summer is almost upon us. You wouldn’t know it looking at the UK weather which resembles something like the African wet season. Some summer blockbuster drills are not far away from spudding now. PetroMatad, I3 Energy, Amerisur, SOLG and many more all have significant drill plans over the next 3 to 4 months. An exciting period for investors awaits. That said, very few exploration wells/drills are successful as proven by Amerisur of late. The last 2 wells drilled on CPO-5 licence block have been disappointing. However, AMER did have success on Plat-26 on their Platanillo licence, delivering an extra 700bopd and boosting full production towards the 7000bopd level. The next well on CPO-5 is expected to be an appraisal around the Indico-1 discovery. Chances of success should be much higher here but there is still no guarantee that they will be successful so risks still remain.

SOLG has been hit hard by local opposition to mining and a hearing to decide on a referendum is expected to be held tomorrow (June 20th). Ecuador needs mining and is prolific as a region when it comes to resources. But the locals and communities want a fair say on how their villages get moved or cleared out and rightfully so. Some do not want any mining at all and fear pollution. On the other side of the argument, the large mining companies bring jobs, roads, infrastructure, schools… the list goes on. One would expect common sense to prevail and a referendum to be avoided.

Finally, stocks like Petra Diamonds and Premier Oil look heavily oversold against a recovering market backdrop. These kind of valuation gaps tend to get filled swiftly once risk reduces. Rate cuts tend to stimulate global growth which in turn can bolster interest for Diamonds. And with OPEC due to meet on July 1st (although they can’t seem to agree on a firm date yet) Oil should be heading back to the $70’s (brent). Concerns over MiddleEast stability are also a major factor for Oil prices and after recent tanker attacks things are certainly not cooling down. Quite the opposite. Yet looking at oil prices, you really wouldn’t guess that there is any risk there at all. A complacent market is a very dangerous market. If things worsen, Oil prices could be trading at $100pb again. That’s clearly bullish for many oil companies out there.

Week 24: Independent picks continue to top the chart without any real challenge from the Guardian or ShareHUB picks. A few good summer drilling results for the ShareHUB folio and things can change fast.

Independent top picks for 2019 – week 24
Guardian top picks for 2019 – week 24
ShareHUB top picks for 2019 – week 24