ShareHub Hotlist 2018 Review – Week 24

Week 24 certainly didn’t lack spice. Exactly what the casino needed as things were becoming a little dull.  Dull makes small coin… Volatility makes big coin. H1 enters its final phase of 2018 bringing with it, Mega Trade wars, Footy fever and Tesla paranoia. Apparently Elon Musk and Tesla are under attack…

“As you know, there are a long list of organizations that want Tesla to die,” Musk said. He referenced Wall Street short sellers “who have already lost billions of dollars,” oil and gas companies that “don’t love” to see solar power and electric cars advancing, and automakers that produce gasoline and diesel vehicles. “If they’re willing to cheat so much about emissions, maybe they’re willing to cheat in other ways?” he said.

Too true Elon. The world is a tricky place when you are single handedly driving change – change for the good. It’s astonishing in this modern day that the likes of VW have not been banged up and the company closed down after Dieselgate. It puzzles me why the US are able to rack up a $30bln bill and force VW to pay it but in Europe (and particularly the UK) litigation is almost unheard of. Well not quite… Slater & Gordon are on the brink of getting VW into court on behalf of over 60,000 owners. UK lawyers are bringing a series of allegations, including that Volkswagen manufacturers defrauded drivers, and that “defeat devices” broke EU rules. Subsequent VW software fixes have from what it seems caused other problems with cars. All in all drivers overpaid for vehicles and are left with a Brand that is no longer trusted.

‘Trust’ is fast becoming the trending word of late as North Korea and US puts its trust in getting a deal agreed which ironically may see a similar scenario to that of Iran. And we all know how that ended up. The trouble with ‘trust’ is that it is only worth a 4/5 year US election term and that’s assuming the acting President isn’t impeached along the way. ‘Trust’ often comes from proven results. Delivering on ones promise. Confidence. But it only takes a wobble here and there and ‘Trust’ goes out of the window. Just ask David De Gea. Do you stick with a butterfingered goalie or replace him with a new one? Trump has achieved some decent deals of late through a bully boy approach but his recent battle with China could be his butterfingered moment. Markets were bolstered by Trump’s America First and keen business drive. The DOW has indeed risen from 18k levels to test 26k levels earlier in the year. But in a trade war, especially one that is protracted, business ultimately suffers due to uncertainty. Just look at Brexit and the subsequent collapse of the UK economy. Markets are right to be concerned as Trump v China will ripple across the globe. Some will benefit from the tariffs and others will suffer. Trumps previous strategies has been to turn on the Tariff taps and then wait for negotiations. Usually these take place pretty swiftly. Then turn off the taps. But here’s the problem. China may not be able to match US $200bln tariff’s as their US quota is more like $130bln at best. But what China can do is drag it out. A long trade war would likely see Trump fall on his sword. China know how to hurt the US, but thankfully are holding fire in the hope that ‘negotiations’ can be completed in the near future. In the meantime, the longer it goes on, the worse it will get. The DOW will find support at 23,500 levels but below 23k and it’s going to be bear market time. In that scenario, 18k is more than possible and the Casino likes that.

Commodities yet again were clouted in week 24. A combination of OPEC fears combined with rising Dollar has put an end to the recent bullish sentiment. OPEC are set to meet tomorrow through to 22nd June to agree output increases. A modest increase of 600kbopd is not exactly going to fill the void left by Iran or Venezuela. Furthermore, After months and months of higher oil prices, the US rig count is beginning to look weak. Where are the new rigs? On a scrap heap somewhere after Dec 2014 OPEC actions is one guess. The reality is US production has increased to record breaking levels but there comes a point where the infrastructure simply cannot keep up. Workforces become hard to recruit. Rigs hard to find. Pipeline materials and backlogs all keep advances in check. The next few months will test out US shale’s ability to scale up in a space that has very little room left. That in itself may well enable OPEC to increase production again in Dec 2018 without making a dent in demand.

Week 24 Current positions:

The DailyMail continues to do well. The ShareHub top ten commodity picks are suffering. It’s astonishing that Gold has not spiked higher on risk off trades. It’s normally the go-to metal when equities look bearish. HUM are well placed to benefit from POG’s rises in the future and the stock is long overdue a return to test 40p levels. AMER has struggled with lower production and delays on exploration plans. The latter should be finally kicking off in July (H2) which should place a rocket under the share price upon any good news. Trading and volumes of late have been higher than usual on AMER which could suggest that the long term large HNWI seller may be nearing an end.

Heads up stock picks PDL, OPHR and MATD are doing ok with MATD having just raised £13.7m in a placing. The first of 6 high impact exploration wells should spud in July which has been a long time coming. Exciting times ahead for MATD holders.

For now, all eyes on OPEC this week!

DailyMail 2018 Week 24
ShareHub hotlist 2018 week 24
Guardian 2018 week 24