ShareHub Hotlist 2017 – Week 47

The tussle between Daily Mail picks and Telegraph top ten continues with the pair swapping places again. Nothing between these picks and more girations to come no doubt as we enter the final few weeks of the trading year. As mentioned last week, the markets/indices do look a little punch drunk. Question is… do they have some legs left to deliver a Santa Rally? Some analysts are already pen’ing in double digit growth for the indices in 2018. Anything is doable in this casino market but 10%+ would put the DOW at near 27k levels. That’s more than toppy. The Commodity sector is certainly one to watch as the rebound has been slow compared to the blue chips / major indices. Many equities have lagged commodity rises and this is blatantly clear across a number of heavy debted companies like Tullow, Premier Oil and Enquest. It’s down to these companies to prove the market wrong and deliver the doubters with some figures that blow expectations away. A few quarters of strong cash generation and debt falling should be enough to kick start some rerates. Of course, to do this PoO will need to be stable and supported in the $60’s. We’ll find out the Saudi’s, Russian’s and OPEC’s view on Thursday Nov 30th. News may filter out ahead of then but Thursday is the big event. In the past, the market has tended to ‘sell the news’ but the sell off doesn’t usually last long before prices are bouncing back.

Stocks of note over the last week are AMER, SOLG, HUM, HUR, OPHR and FPM. The first two are via the ‘heads up’ coverage. AMER look on track to deliver some very solid production numbers in Dec with Mariposa-1 now contributing to cash flows. The company really is in the best shape I have seen it in over 2 years and with PoO in the $60’s, it’s going to feel more like PoO in the $70’s based on AMER’s OBA pipeline $10pb (approx) savings.

SOLG has drifted along for a few weeks now as the banks complete the distribution of the £40m bought deal to selected clients. The news should be thick and fast over the next 6 months+ which puts SOLG top of the wish list for the sharehub 2018 picks. All will be revealed on Jan 2nd.

Hummingbird Resources are quietly delivering on all their promises with Gold pour on time and budget for end of Dec 2017. The way progress is going, it would not surprise me to see a Gold pour happen a week or two before then. Thereafter, 2018 looks like a year of rerating for the business.

HUR has been drifting for months now as it loses it’s high impact exploration shine and moves into the boring phase of development. That said, it’s not that long now before first oil in 2019 and I would expect the share price to recover as time ticks on and development milestones are passed. One highlight to watch out for in Dec is HUR’s updated CPR. Dr Trice will be keen to get this out after making several improvements in modelling and subsequently on commercial terms.

Ophir Energy is another ‘drifting’ stock. Like HUR, they too have a large development project (Fortuna) although the difference is they are still looking to get sanctioned and fully financed. News last week hints that an indicaton on financing terms will be outlined to market circa Mid Dec. OPHR is languishing at all time lows so there’s plenty of upside and growth to come should they please the market with Fortuna funding terms.

Last up is FPM. Faroe have been tickling along nicely and with PoO in the $60’s, the cash should be rolling in especially as they are essentially cash rich and debt free. That said, the recent bond deal and move to advancing development projects will turn FPM into a more typical ‘debt’ balanced E&P company. I say ‘balanced’ as the debt is moderate and not excessive.

Overall, plenty of news to come in Dec and with a bit of luck and guidance from OPEC, the PoO sensitive stocks should do well. Of course there is always risk to manage and examples that AIM is not the only hotbed of coals out there can be seen via the likes of Centrica, Mothercare and Carillion to name a few. The blue chips and large mid caps have big risks too and it feels like we are entering a prolonged period of ‘change’ from the ‘old’ to the ‘new’ as technology and the fast developing digital world rewrites the way we do things on a daily basis.