Another lacklustre and weak period for equities. Majority of major indices have wiped 2018 gains out completely and are trading at levels seen last year. All the risks of early 2018 remain and whilst little rocket man and the strawberry blonde appear to have shaken hands, not a lot has actually happened. Same could be said for Brexit. There’s more talk about ‘extending’ and kicking the can down the road than there is talk of getting agreements done prior to deadlines. The longer the can is kicked down the road, the more money the EU gets from the UK. It’s like paying your mortgage off and then the lender coming back to you and asking for another couple of bonus years. Big business is just getting on with it as best they can but huge changes await around the corner and it is going to be choppy. The likes of Apple, Google, Facebook and of course Amazon are unaffected. Cross border trade for digital online retail services seems almost non existent. Hammonds recent budget yesterday highlighted the need to clamp down on tax payments by these companies but that’s not going to take effect until 2020 and even then it’s minor. As an example, some will remember how UK listed PartyGaming the pioneer in internet gambling/poker/casino games etc dominated the world including the USA. The Vegas groups got left behind. But within a year or two a bill was slipped through the senate that ‘banned’ non US companies doing business with US consumers. The legal responsibility rested with the banks that do the credit transactions. The US has for years upon years been protective about ‘business’ in and outside the States and Trumps recent mantra of America ‘FIRST’ is just a blunt reiteration of this mindset. On the other side of that mentality is an America that is doing trade with the rest of the world via Apple, Google, Amazon and so on and not paying their fair share of tax due while also single handedly (in Amazon’s case) destroying the UK retail sector. So why can’t the UK or others introduce a similar ban on sales to these companies? Why not put the responsibility onto credit card companies and banks. It’s been going on for years and looking at Hammond’s recent offering, I do not think the big US firms are worried too much and Hammond should be ashamed of that. Now is the time to put a heavy boot in and not pussy foot around. When the UK finally gets over the Brexit line, it will need to put BRITAIN FIRST. That needs to happen not in 2 years time, but now.
Week 43 Review:
Dealing with ShareHub underperformers first, unfortunate news from Hummingbird Resources has all but put a nail in that coffin for that stock in 2018. A combination of poor management decisions has seen an attractive investment case and 38p share price fall to just 19.5p. It’s a wake up call for all investors to not assume that cash flows will come just because a mine is fully functional. Hiccups, unforeseen or down to managerial issues can occur in any business. HUM’s ability to deliver the mine on time and on budget should be applauded but since then costs have spiralled and AISC’s of $900oz have taken the gloss of a fine future. The latter now rests firmly with the planned boosting of resources which is now a must. If they extend mine life to 10 years, then the story looks much brighter. Amerisur Resources continues to drift lower. Anyone would think PoO is trading at $28pb again. Amerisur is debt free and has cash of approx $50m in the bank. 5000bopd production and an exciting exploration plan within the CPO-5 licence block which is run by Indian giant ONGC. It’s certainly a puzzle and management have been silent so one wonders whether an MBO deal may be in the wings? Eitherway, assuming there are no uglies lurking, I would expect AMER to put on some weight once the exploration drill bit starts turning. 3 x dusters seem priced in already which is a little pessimistic considering the success of the first well. Could be the market just being thick (which it is 70% of the time) or simply selling pressure from large HNWI’s like Rex Harbour. Next is Cora Gold. Decent news out on resources but the market knows they need funding to progress and thus share price progress is like being stuck in mud until resolved – the company needs to get funding sorted so plans can move forward. And finally CERP. This company has a bright future now that M&A is bedded in and spanish issues look under control. I expect newsflow to pick up once the recent placing shares have been waved through at the upcoming EGM. Schroders are not in the habit of throwing cash away and their investment in CERP is sizable. Out of the 4 lagging stocks, I would expect CERP to stand the best chance of seeing green again this year. Not much to report on the positive performing stocks. Serica have unplugged their blockage and are doing much better after Iran sanction issues put to bed… for time being. PVR and SOLG could have an exciting end to the year as SOLG are due to report on updated resources report and PVR are heading ever closer to a transformational drill programme on their Barryroe asset in 2019.
The newspaper picks are beginning to look like tired. But losses have been plugged of late and it is the ShareHub picks that seem more intent on tracking down to red levels rather than the newspaper picks seeing green again. I think it’s highly unlikely that it will end positive for the DailyMail or Guardian in 2018.
Commodities M&A still missing in action… surely it has to kick off soon? Roll on week 44.