ShareHub Hotlist 2018 Review – Week 7

Stock markets appear to have recovered from the kneejerk panic that set in after the DOW took a top slice at 26750. With the DOW now at levels near 25200, I’m not entirely convinced 1500pts lopped off is sufficient considering the diabolical rise through Dec to mid Jan period of some 2500pts. The major index will take some time to find its base again so don’t write off some sizable moves on the DOW in coming weeks. That said, if the brunt of the falls which took the DOW down to 23500 were pegged to the VIX trades and Algo’s, then it’s possible this ‘phase’ has been settled. The next few weeks should offer a better guide to ‘stability’ or ‘instability’. Short term, equities are struggling to find their own base with many becoming disconnected from the broader market sentiment. This is often the case with smaller caps and mid caps as investors tend to flee or steer clear of markets when volatility returns. Examples such as Premier, Tullow and Enquest to name a few are just pennies away from where they were when ‘market mayhem’ was underway and the DOW was testing 23500. The DOW and PoO have since recovered from recent lows and yet TLW, PMO and ENQ are roughly 30%+ off recent 2018 highs. Compare to BP, Glencore or Anglo and you’ll find these big bellwethers are down minor amounts compared to many mid tier sector players.

To help the ‘market’ on valuation gaps, the O&G sector desperately needs some decent M&A action to refocus the minds. 2018 looks as good a year as any to get the cheque book out, so keep an eye out for early signs of acquisition or takeover chatter in the sector.

All 3 top pick lists recovered a little but as mentioned above… not enough by any means. Across the ShareHub picks for 2017, standout news came from HUM, SOLG and WRES. SOLG in particular has reported great drilling results yet appears to be ignored. The market appears to be waiting on the next MRE update which is cited for around mid April. With exciting drilling soon under way on Aguinaga, SOLG looks set for a strong recovery back to 30p levels assuming the catalysts/news are good of course. WRES delivered final funding terms although the 5% warrants have yet to be confirmed. Getting a funding deal secured is a major step for the business and whilst the development project ahead if tough, the future looks bright. Elsewhere it has been quiet on the news front so not much to report or discuss at present. CERP’s quarterly update is likely to appear around early April but news on Bolt and Spanish licence may come out sooner. The stock looks cheap compared to peers especially considering the company is debt free and cash flow positive.

Recent heads up calls on MATD and PDL are doing very well and look set to improve as further progress is made. MATD is certainly an attractive stock on a risk vs reward basis. With exploration you can lose hefty chunks of your investment should the drill bit return nothing but dirt. But with 4 x drills lined up for 2018 (2 of which are awaiting rig confirmation) there will be 4 great opportunities to hit black gold. Plenty of excitement lined up for investors and exactly as it should be for an AIM stock. PDL’s interims announced today should help investors make a decision on the companies ability to generate cash flows to pay down debt. At present a reneg’d debt is not done and dusted although looks like being sorted shortly, albeit another ‘can kicked down road’ solution. Overall, the company looks in the same kind of shape it was when priced at 140p+. Hence at 74p today, the market appears to be using a heavy discount due to Rand issues and perhaps lack of clarity on debt position.

Week 7 positions below. TheShareHub picks just shaving it for now.