It’s been a good start to the year for TheShareHub top ten picks albeit, very early days. 2019 is likely to be just as crazy as the end of 2018. It could be worse or it could be better. I simply cannot say one way of the other. But I do believe that Commodities will do better as PoO returns to balance and OPEC makes adjustments to suit a potentially weakening demand. Apple Inc’s disasterous update on iphone sales has been a long time coming. The company announced last year that they would no longer be reporting on specific iphone sales. Easy to see why. Every brand has its time and Apple have done brilliantly over the last decade or more. But in this world, top brands are overtaken pretty fast and can be left for dead. I don’t think that will be the case with Apple, but I do think they are on the decline. Samsung and others are now producing equally stylish and indeed, better performing devices. Apples’ woes are not down to global growth slowing. The drop in sales is a signal that the World has moved on, and other Brands have caught Apple up. There was a time when Nokia and Motorola looked invincible. There was a time when Sony were kings of all walkman’s (for those old enough to remember the good old cassette tapes that got warped and wrinkled over time). Bit like Apple. I wouldn’t say warped but there are some areas of their business and products that is beginning to look distinctly wrinkled. So should we be fearful of Apples’ demise? Nope.
With the markets bobbling about like Dice in a Casino, it would take a fool to try and predict where the DOW or FTSE100 would end up this time next year. Investors should be aware that bull runs fuelled by QE invariably turn into Bear runs when QE is removed. The question on everyones lips going forwards is that if global growth begins to slow, will QE be extended or implemented again by the Fed Reserve? It’s very possible. And in that scenario, equities could see another run at all time highs. US interest rate policy is expected to cool which could help equities in 2019.
Recently, the commodity sector has seen an increased amount of activity within the Merger and Aquisitions space. M&A has been missing for sometime now but cheeky offers are appearing and targeted stocks are disappearing. Last year Ithaca Energy got gobbled up. This year it looks like Faroe Petroleum’s turn. FPM may yet keep DNO at bay, and their offer looks opportunistic when timed against a poor market backdrop. Ophir Energy is another stock that has seen interest with a potential offer to be tabled or not… in the next few days or weeks. Shell might want to have a say in the matter as they have a working interest in Ophir’s highly valued Tanzanian assets. Interesting times ahead and one to watch even if you are not invested as valuations may have knock on effects to other stocks.
Last year, TheShareHub dropped a number of stocks and added some fresh blood. This year, the cull has been less due to many of the 2018 stocks continuing to ooze potential. This year sees the introduction of 4 new stock picks and 6 stocks rolled over. As follows in no particular order:Amerisur Resources – 2019 Entry price 15p. Y/E Target Price 60p. Amerisur Resources has been hammered over the last 2 years by the presence of a persistent High Net Worth individual called Rex Harbour. A sizable amount of stock was dripped into the market on a daily basis which over time dented sentiment and eroded any good news issued by the company. Strategic pipelines were built, costs lowered, prime exploration acreage bought and increased. Cash pile increased. Production doubled. Oil Price doubled. Debt free. Yet Amer’s share price has virtually halved from levels seen 2 years ago. Odd indeed. Today, the company is in a better position than it was when the share price was last at 32p. Recent success with the Indico-1, OXY farm out deal and a plethora of director share purchases… a company brimming with confidence. 2019 is a busy year on all AMER’s assets and by the end of 2019, any potential predator out there will have a very good idea of what value AMER presents. TheShareHub predicts a take out price of 60p. Success across the exploration folio is crucial in attaining this price.
Columbus Energy – 2019 Entry price 2.9p. Y/E Target Price 14p.
CERP has assets in Trinidad and Tobago. At last count, the company was producing around 750 bopd. Not much is it? But with a market cap of just £23m, CERP’s cash flows are positive with PoO around $50pb. The company has a proven CEO in Leo Koot. He’s had to spend the bulk of 2018 sorting out spanish issues as well as old legacy stuff left by past poor management. Leo’s idea is a simple one. Get CERP producing over 1000bopd and use the cash flows to explore the companys deep exploration targets. Some of these targets could hold 100’s of millions of barrels. Any drill in the SWP area would present investors with a relatively free ride on high impact returns as CERP would be underpinned by solid production. There are some companies out there that have zero production and yet command market caps 3 x the size of CERP based on exploration opportunities alone. CERP have all the ingredients for the investor looking for risk off exposure to high impact exploration. Target Price 14p, but needs a solid exploration result to hang onto those levels. Company update due very soon.
Hummingbird Resources – 2019 Entry price 21.55p. Y/E Target Price 36p.
Roll over from 2018. A disappointing year with operational and management issues. If the company can get back on track and extend mine life at Yanfolia, then a recovery back to 36p looks realistic. The new ball mill does not arrive until last Q3 2019 and the upcoming earnings numbers are not likely to boost confidence. But moving into Q2, HUM should be heading in the right direction and could be boosted by Gold’s new sparkle due to global recession fears and risk off investing. Target price 36p but needs to deliver operational excellence 365 days of the year with no hiccups. Quite a tough task for a small miner.
(new) Petra Diamonds – 2019 Entry price 37.68p. Y/E Target Price 77p.
After a year of fighting debt off and Rights issues combined with less than happy local governments, PDL are back on track and should be set to release some very attractive numbers in 2019. Whilst there is the usual hangover from rights issues and debt scenarios, PDL looks undervalued and a potential takeover target. Target price 77p. Requires operational excellence, strong diamond sales and governments to play nicely.
(new) PetraMatad – 2019 Entry price 2.28p. Y/E Target Price 16p.
2018 was a poor year on a number of fronts. Significant funding and dilution to equity put a real dampener on interest ahead of some mouth watering exploration. In the end, both drills delivered nothing commercial and with no back to back drilling due until Q1 2019, the stock has been treated to the usual AIM investment cold shoulder. Next week the company is set to update the market on 2019 plans. The current market cap just about covers the cash in the bank. Fully funded with an exciting exploration plan for 2019 surely deserves a premium added to the share price beyond cash? Target price of 16p is based on exploration success. Should the company impress with next weeks update, then investors may re-enter the stock early ahead of the next exploration well. Very risky stock as pure exploration play.
Premier Oil – 2019 Entry price 66.55p. Y/E Target Price 180p.
Debt heavy, but asset rich is the best way to summarise PMO. With production heading to almost 100kbopd levels, the mind boggles at the markets current discounted valuation of 66.5p. Lower PoO will hurt PMO but with assets like Sealion and Zama under their belt, they could make asset sales if the market really got bad. OPEC seem intent on keeping prices ‘fair’ so I do not expect Brent to drop below $70pb for very long once the rebalance has been achieved in Q1 2019. At $56pb, it has plenty of room to head higher without raising eyebrows. Should the second Zama exploration well deliver the same results as the first well, investors might find themselves in a similar boat to Ophir Energy. PMO are far too attractive to potential predators to remain at today’s price levels without having a takeover approach. Ironically, it was Ophir Energy that were apparently sliding the rule over premier oil sometime ago. What goes around… comes around? Target price factors in exploration success and consistent operational excellence with debt reductions along the way.
(new) Sirius Minerals – 2019 Entry price 20.8p. Y/E Target Price 32p.
It’s not easy delivering a huge project like Sirius’ Potash mine. Delays are to be expected and often projects run at higher costs. These are the main reasons why SXX has struggled of late. The commercial story still looks a billion dollars and the investment case is strong. Key operational milestones in 2019 require smooth transitions and if all goes well, the market should reward with a rerate. Target Price of 32p is based on all going swimmingly. After a tricky 2018, SXX look back on track.
Solgold – 2019 Entry price 36.75p. Y/E Target Price 75p.
If you keep building upon resources and delivering terrific assays, finally someone will come along with the deep pockets required to develop it. The problem for Solgold is not how much resource they have but defining it faster enough to get a fair price. With BHP buying up crucial voting shares and Newmont doing the same, I think a battle for Solgold will inevitably fall to these two. An offer that shareholders cannot refuse could be pitched at 75p or more. Anything less and shareholders may just wait it out.
W Resources – 2019 Entry price 0.54p. Y/E Target Price 1.9p.
Too many fundraisers at 0.5p or below has kept a cap on the WRES share price. They need to deliver operational excellence and get to a position whereby they are cash flow positive to reach the dizzy heights of 1.9p. But on a valuation basis, the Target is quite achievable. Tungsten remains in high demand and WRES are perfectly positioned in Spain to deliver globally or on their own doorstep across Europe. If cash flows and production are steady, the share price should climb nicely in 2019 providing the CEO doesn’t pull out another fundraiser again.
(new) Wishbone – 2019 Entry price 0.18p. Y/E Target Price 0.75p.
By far the wild card of all picks. Risky and no doubt needing further funding down the line. But for now, after a series of 0.1p equity issues, Wishbone are up and running. Gold prices are important but so is operational excellence. Like HUM, Wishbone will need to keep costs down and get cash flows coming in fast. Production from Honduras is underway after licence approvals late in 2018. Shipping to Dubai should commence in Q1 and if all goes well, Wishbone should be a multibagger contender for 2019.
Regular updates on all TheShareHub top ten picks will be posted throughout the year. As per the norm, 2 x newspaper picks for 2019 have been added and will go head to head for the Hotlist cup. This year, TheGuardian gets another chance to make up for a poor 27% loss last year. And The Independent features with a whopping 12 top tips. Some based on a decent Brexit scenario and some based on a no deal case. Unfortunately, they can’t have their cake and eat it, so all 12 picks are in.
As always… be careful out there. It’s more volatile and unpredictable than ever before.
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