ShareHub Hotlist 2018 Review – Week 36

Summer malaise over? Not quite, St Legers day (Sept 14th) is said to mark the official end to the markets summer slumber so a few picnic days left for traders.

So lets look at some numbers. May 2018, DOW averaging around 24500 level. Sept 2018… DOW edging up to all time high levels last seen in early Jan 2018. Trade wars, Brexit fears, North Korean Nuclear war, Trumpism… all contributed to a massive sell off after the DOW tested 26200 levels. Quite right too. These are big risks and worthy of derisking. Fast forward 6 months and the DOW is just 200pts short of the same highs seen in Jan 2018. So what’s changed? Absolutely nothing! A quick cut and paste…Trade wars, Brexit fears, North Korean Nuclear war, Trumpism… all the same if not worse as there has been little sign of progress on any of these fears. More risks are on the horizon, with US mid term elections underway which officially kicks off the US media mud slinging contest. It’s astonishing that the US markets are doing so well. Of course there is a solid reason for Equities being higher and it’s a simple one. There is nothing else out there at present that remotely offers any kind of decent return for capital. Interest rates woeful. Strong dollar and Gold unwanted – all a classic sign of a one track minded market. Surely it would be sensible to hedge some risk and buy into the go-to safety haven that is GOLD? Problem is, the market is rarely sensible and like all good casino’s prefers volatility and ‘events’ as that’s what generates the best returns. 2% moves over a week or two, back and forth, back and forth is too sensible by far when you can generate 10% or 20% moves like that seen in early Jan 2018. So be sure of one thing, when the ripples on the pond appear at their most tranquil, that’s the time to watch out for the next big tidal wave coming over the hill. And considering the markets are no further derisked than the last wash out from 26200 on the DOW all the way down to 23000, a rinse and repeat should not be unexpected.

Meanwhile, outside the usual bluechip sectors, the commodity sector continues to under perform despite rising prices. PoO looks solid in the mid $70’s for Brent and with Iranian sanctions likely to bite hard in Q3/Q4, levels of $85+ for Brent cannot be ruled out. As mentioned before, the market likes ‘events’ and whilst PoO has recovered over 100% off lows, it has been a slow and deliberate path. A rise to test $100pb for Brent would be an ‘event’ and it only needs $23pb increase. Easily done if US shale numbers continue to decline. US Rig counts are not going anywhere fast – the same could be said for US production. It’s been stuck around 10.9m level for a few months now and only recently tipped the 11m mark. Infrastructure problems being blamed at present but some insiders believe it could be the beginning of a plateau period, something that would please the Saudi’s and Russian’s. The latter two are the only reason why PoO is not $150pb. If either were to hit any production problems whether through sabotage or wars or just natural disasters… the world would be in big trouble. Too much attention is being put on the Saudi’s and Russian’s ‘adding’ production and not enough attention applied to the declining global supplies that rest within OPEC partners and non OPEC suppliers. South America is in turmoil. SE Asia not seeing much investment. The majors are reigning back on big development projects… the list goes on. Yet, here we are with many sector performers like Tullow, Premier Oil, Cairn and others all trading at levels last seen when PoO was in the $40’s. Makes no sense at all. So what’s going to change it? What’s going to get the markets attention back to commodities? One simple answer… M&A. It’s been brewing for sometime now and in the next 6 months it would not surprise at all to see a flurry of M&A activity. It only takes a couple of deals to spark a revaluation of the sector. With summer trading over, perhaps the next few months will see some deals going through. SOLG.L saw BHP buy a minority stake in their Copper/Gold asset in Ecuador. This could be the beginning of the end for SOLG and after a few years of exploration finally deliver shareholders some real profits. SOLG is part of TheShareHub top ten for 2018.

Elsewhere within TheShareHub top ten picks, AMER and CERP have been actively picking up assets cheaply. Both are underperforming sector peers thus far but should be putting in a very strong end to 2018 assuming all goes well with current operations. Big exploration is underway with MATD yet the market is not treating the stock with much enthusiasm after the recent 10p placing took the wind out the sails. Shame, as the stock would surely have been around the 18p mark by now with just days to TD. Certainly one to keep an eye on as back to back drills offer some underpinning to the stocks share price. The second drill ‘Wild Horse’ is listed as one of the world’s top 20 exploration wells so it should see greater interest than the modest ‘Snow leopard’ drill which should be completeed shortly. MATD is part of TheShareHub ‘heads up’ picks for 2018.

Finally, Hummingbird Resources deserves a mention as the stock is surprisingly the worst performer in the ShareHub 2018 picks. There is absolutely no reason what-so-ever for the valuation gap between projected earnings and market cap. The share price of 26.5p today is representative of where the company was last year when they were still in the middle of building the Yanfolila mine. Since then, the Gold price has remained at a similar level, HUM have a fully functional gold mine and cash generation is rolling in. It’s derisking by the day yet the share price remains weak. A puzzle indeed. Next earnings announcement and production update should see some common sense return. With global risks rising (US mid terms) and equities sky high, GOLD must surely be the go-to metal for when the inevitable market correction arrives. All points towards HUM being a very attractive investment for investors interested in gaining some exposure to GOLD whilst gaining good value entry points in share price terms. With GOLD in the 1400’s, HUM is a potential 60p stock. That’s a multibagger inwaiting. No guarantees of course and risks still remain.

Week 36 Status:

TheShareHub picks continue to rule the roost with the DailyMail picks slipping and the Guardian picks dragged down by retail woes at Footasylum. Roll on St Legers day… it’s looking good for a strong finish to 2018 for TheShareHub picks.

TheShareHub picks Week 36 2018
DailyMail picks Week 36 2018
Guardian picks Week 36 2018

 

One thought on “ShareHub Hotlist 2018 Review – Week 36”

  1. I am invested in HUM and after over a year, I’m losing faith: the SP has declined steadily from c. 40p in Sept 2017 to 26.5p now, despite the completion of the mine and successful run-in to full production, and apparent success at Cora Gold (a 30% investment by HUM) in finding new reserves nearby to extend the life of the mine.

    HUM has been drilling for over 2 months to find its own new reserves near the mine and still no news: does the market suspect the worst – that nothing new will be found, and with Yanifolila grinding through its known reserves at 20% a year, into a depressed POG, perhaps it will end up a white elephant in 5-6 years time, with fully-functioning kit but nothing left to mine? You can’t base a SP on projected earnings if those earnings are likely to drop to zero in the medium term.

    I have not been impressed either with the company’s PR: what does the BOD do all day, week or month? They seem to be sitting saying “look, we built a mine!” but they are communicating very little about their future intentions for the cash they’re generating, and certainly are returning nothing but a declining SP to shareholders.

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