Week 21 concluded. Just another 5 weeks to go to H2. Thus far, we’ve had the euphoric extended santa party in early Q1 followed pretty swiftly with a market wash out which saw 1000pt day to day swings on the DOW. The dust has since settled, but the present market mentality is to ‘over-react’ to twitter/media headlines and then under-react to the real factual news. It’s not uncommon to see some jumpiness after such a bullish run. Take the recent pullback on PoO from $80pb to $75pb (Brent). Nothing goes up in a straight line so some profit taking was always going to take place at some point. But what followed across many commodity focused equities was way overdone. PMO as an example dropped around 30% based on a mere 6% decline in PoO. Tullow performed better yet still suffered a significant 15% slide. It might take a few more gyrations yet before the markets get some genuine alignments to higher PoO pricing which looks set to remain for the duration of 2018 or certainly through to the Saudi Aramco IPO. Post that massive event (world’s largest IPO), it is anyones guess.
Another week passes and another non-event for Mrs May and Brexit. The stalwarts in Brussels will have had their eyes on what’s being served up closer to home. Italian Spaghetti laced with popular toppings or Spanish fiery chorizo spiced tapas. It would appear that the EU has enough on its plate for now. Brexit, Texit or Spexit. It’s not going to end well no matter how you cut it. Elsewhere Mr Moon seems to have stolen Trumps thunder by rescuing the Korean talks. The market doesn’t like uncertainties, so issues such as Iranian sanctions and Korean talks will dominate near term. It tends to go a little quiet during World Cups almost as if there is a global political truce in place while the beautiful game gets played out. So don’t be surprised to see the usual summer malaise kick in. Issues around Putin (or Russia) seem to be eerily quiet. Although the owner of Chelski seems to have found the UK less than helpful when gaining a new UK visa. Easily solved… just head off to Israel and get a new citizenship. Surely Mrs May and co will not be side-footed by such shenanigans? Well, the UK Gov have been aware of Russian cash making its way through the City of London for decades and thus far not a lot has been done about it. Shocking really.
Week 21 review:
Yet again, the Daily Mail top 8 picks performed well while the ShareHub commodity focused top picks consolidated after some hefty gains. It’s neck and neck between these two. The Guardian picks suffered further but are still 0.5% up for the year. TheShareHub top ten picks quick fire summary below:
1. AMER – Poor H1 performance to date and large seller still dumping stock. But recovery from lows looks solid leaving decent upside ahead upon upcoming drilling success. Note: Dusters are also possible.
2. CERP – Next Quarterly update eagerly awaited especially on Production. Share price is 7% down for the year which leaves plenty of upside ahead based on playing catch up nevermind operational progress. The company hasn’t put a foot wrong so the static sp is a puzzle.
3. CORA – Decent exploration results. Next phase requires more cash hence another placing should be on its way or some other deal/arrangement?
4. HUM – Need to see a quarter or two of solid cashflows before market will mark up the share price to where it should be circa 60p+. Exploration phase to kick off soon providing near term catalysts along with shiny Gold coin sales. Plenty of upside in H2 assuming exploration phase goes well and cash continues to roll in as planned.
5. PFC – After the Barclays SFO debacle, it’s surprising to see PFC still suffering from this issue but until it is resolved.. the market will slap on a discount. RollsRoyce came through just fine and PFC should follow. Ops look on track.
6. PMO – Catcher going very well. High impact Mexico exploration around the corner and debt beginning to reduce. Cash flows pouring in with PoO in the $70’s and $80’s. The only surprise is that the SP is still sub 150p. After the Solan debacle, one can’t blame the market for taking the cautious view.
7. PVR – Barryroe looks set for a 2019 story rather than 2018 which is a disappointment. That said, booking an advance ticket ahead of that entertainment might prove fruitful as the stock looks cheap based on future plans.
8. SQZ – Needs to get more clarity on 50% Iranian owned assets but even placing these aside the cash flows should look solid for 2018. Plenty to do across their folio in 2018.
9. SOLG – Needs an updated MRE as the market is beginning to ignore the monthly resource updates no matter how great they are. Investors want to see planning for the future in tandem. Large development plans cannot be defined until full resource known but some kind of indication on an early commercial (smaller) development to bring in cash flows would be welcome.
10. WRES – Apart from the usual development issues, progress has been slow since the funding deal. The company nomad missed the fact that one of WRES’s largest shareholders appears to have failed to file accounts and as such has been struck off. Whilst WRES did update on this matter, it has yet to be finalised with the 6% holding being held by the Crown. Just how much do these nomads get paid these days? Spanish politics important to WRES so something to keep an eye on.
More updates to follow on the above ‘as and when’ the news rolls in.