ShareHub Hotlist 2017 – Week 46

Much of the same. Drifting along awaiting a number of newsworthy events such as OPEC meeting, UK budget, US tax reform, Brexit, the list goes on. The US market looks like it needs a break after a bullish period which has seen the DOW rise from 19800 to 23800. That’s not far off 20% growth. That’s massive for a Major indice like the DOW. In contrast, the FTSE100 has risen from 7150 to highs of 7560. It’s barely up 5% as I type. Across the commodity sector, in Oil&Gas, PoO has had a great run, up from lows of $42 (wti) to recent highs of $57 in 2017. That said, it is actually up just $3pb from Jan 2017 levels. Looking at some sector bellwethers, SHELL are trading at highs last seen when PoO was in the $100’s. The likes of Tullow Oil and Premier Oil to name just two are trading at levels last seen when PoO was in the $30’s. Astonishing gaps and disconnects in market valuations compared to previous months or years. The mind boggles at what is going on as it has no obvious rhyme or reason. It’s just not normal to see these disparaties without any meaningful moves of late to correct them. Instead, the market just seems to bob along like it’s on autopilot but with no idea of the destination it is headed for. What does this mean for investors? Well, one word would do it and that’s ‘caution’. When markets begin stumbling around looking punch drunk, you need to sharpen up and get ready for what may come next. It could be volatile. One go-to metal when uncertainty is around is GOLD. Recently, the trading on GOLD has been odd to say the least. Over the last few weeks the commodity has seen sharp price spikes of $10 per oz. Again, it’s the unusual nature of these that raises the eyebrows. It would not surprise me one bit to see POG head higher over the next few weeks and considerably higher in 2018. Dollar weakness is causing issues across a number of pegged commodities and with Bitcoin going bonkers, I feel the market will once again turn to the solid and reliable nature of GOLD. Getting a decent GOLD equity/stock into the folio as protection or a decent hedge is never a bad idea. There are plenty of stocks out that that offer exposure to POG upside and not all are the same. Some have high AISC’s and others have very low AISC’s. It’s the latter that often move faster and rerate when POG moves higher as they see greater upside to the cash flows. Hummingbird Resources is TheShareHub’s star performer for 2017 thus far and it comes as no surprise that there should be more upside to come. The company is on budget and on track for first Gold pour from their Yanfolila mine in Mali and should POG head higher, Hummingbird will be generating seriously large cash flows. Certainly one for the folio if you like the risk vs reward that comes from early phase production miners.

Week 46 – A weak one for commodities.

The Telegraph opens up a gap again after being challenged a couple of weeks ago by the Dail Mail picks. It’s still unclear which one of these will take the winners spot at this stage. The ShareHub top ten slipped back to levels last seen when PoO was in the $40’s. Very odd considering PoO is just a few % off 2 year highs. It’s going to take something very special if the wooden spoon is to be avoid this year.

Roll on next week. Note, OPEC meet on Nov 30th.