The Telegraph picks are steaming into what looks like a nailed on victory. TheShareHub picks can take some glory in notching up a multibagger in 2017 (all down to the HUM team) but the rest of the picks really need to pull their stocks up. It’s tricky out there at present. Investors are taking risks with O&G companies in a volatile market yet gaining very little reward against the recent PoO recovery. Tullow, a popular bellwether for the sector have done nothing wrong yet still trade in the 180’s which is odd considering the price was 300p+ just 10 months ago when PoO was $52 (Just $3 shy of today’s prices). There are other examples out there which show ‘selective’ buying/building by the bigger money players. Looking at the super glom’s as I call them, Anglo American and Glencore, both are doing very well in 2017. This time last year, Glencore was 220p. Today its 364p+. Anglo A. was testing the 1000p level in Oct 2016. Today it’s testing the 1500p zone. These moves in prices are not in the millions but in the billions. Last time I looked Glencore was worth around £53billion! So how does the market happily add £17billion (50%+) to Glencore’s cap yet struggles to price Tullow at over 200p or Premier Oil at 100p+. It’s a puzzle. Surely it’s not too much to ask to see some sensible valuations return to the debt heavy companies like Tullow, Premier Oil and Enquest to name a few? Perhaps the next 3 months or 6 months could be their time? For the moment, the smaller caps / penny shares are showing signs of decent money flows again. Bolstered by some astonishing multibagger successes like FRR, EME and UKOG, the private investor is beginning to make their weight known again. Long may it continue.
Outside of the top ten picks, TheShareHub gave ‘heads ups’ on CERP (3.9p, now 6.45p), PANR (45.5p, now 59.5p) and AMER (19.75p, now 19.5p) recently. The first two have performed well and should continue to do so over the coming weeks assuming newsflow is good (and there should be plenty of it). AMER (like Tullow) seems to have been forgotten and left behind. It’s still trading at levels that were last seen when PoO was in the 30’s and their production was half the 7500bopd it is today. AMER is debt free and cashflow positive. It really shouldn’t be treated like a Tullow. Still, it only takes a few days corrective trading and AMER could be 26p/27p again without anyone batting an eyelid. That’s todays crazy market for you! Sloppy? Complacent? It’s like the brokers and analysts have finally given up the ghost or are just tired of trying to price stocks fairly. As mentioned before, it’s more a case of ‘show me the money’ than ‘we’ll price in some good news’ ahead of forecasts. Markets are not looking forwards very much of late, and appear to be simply taking each day as it comes. This environment tends to leave valuation gaps or disconnects between share prices and fundamental valuations. Finding and exploiting those gaps is the number one game. Today’s news that Schroders have taken a near 10% holding in CERP is a good sign for all tired commodity small cap followers. It might be a one-off or it could be the beginning of a new cycle which sees the bigger money players returning to speculative small cap players which are undervalued and have great assets. The funding market may still be tight, but if it does open up again, then minnows like WRES.L should rerate. It’s access to funding / capital that is holding many of these minnows back.
As per usual, not without risk and nothing is a shoe in these days. Roll on next week. It’s beginning to feel a little better out there across the commods.