ShareHub Hotlist 2017 – Final Results

Congratulations to the Daily Mail with their top 9 picks for 2017 returning a very respectable 20% gain to win the 2017 Hotlist cup.

The Telegraph picks fell just 0.4% short of the finishing line but with 19.6% gain, heads should be held high. Between the two, it’s worth noting that some stocks (more than others) will have delivered decent dividends which will not be factored into the above gains. But in the true spirit of the challenge, the race to the line is based on out-right performance with divi’s excluded.

TheShareHub picks made a late dash but were never in the running for the Hotlist Cup after some puzzling performances by mid and small cap E&P’s. Head scratching stuff against a very solid PoO recovery. With Tullow, Premier Oil, Enquest and Faroe in the picks, you would have expected a firm response from share prices after seeing PoO move from Low $40’s to high $60’s per barrel (Brent). When PoO moves up 40% it’s a recovery. It’s also very profitable to companies who have already reduced opex to low $20’s. Against this bullish backdrop, Tullow is actually 21% down on the year. Enquest 32% down, Faroe virtually unmoved and Premier Oil comes in with a 3% gain. Tullow, Premier and Enquest were all marked down in 2015 and 2016 based on the Oil Price collapse. It’s mind boggling to see these stocks trading at levels last seen when PoO was testing $30pb. Just what on earth is the market thinking? Well, it could be a case of ‘not thinking at all’ when it comes to higher debt weighted E&P’s. ‘Ignored’ is probably the most appropriate term. The market has been on a feeding frenzy when it comes to blue chips and the FTSE100 or DOW or S&P. The bigger companies have been gaining the attention. As an example, SHELL finished the year with a share price that is at a 3 year high. Yep – last time Shell traded at that level PoO was testing $100pb, US shale was flying high and the Saudi’s had not flooded the market. So what’s special about SHELL? Well, it has more to do with institutional money flows than valuations. Investment banks and hedge funds are simply awash with cash which has been injected into their paws via cheap QE. When money is handed to you at such a cheap price, you don’t have to take many risks to put in a decent return especially if everyone else is on the same wave length. Add to this the ‘handcuffs’ that have apparently been applied to ‘some’ trading houses post Lehman’s 2008 collapse and it’s not hard to see why the money flows found their way into safer, less risky Oil plays rather than higher debted companies like Tullow, Premier and Enquest. That all said, the Oil Sector in 2017 has shown great signs of progress over the last 2 years. Capital and Operational costs have been reduced dramatically and companies are looking leaner and meaner. The perfect mix going into 2018? Well… that depends on the broader market sentiment of course. ShareHub Readers will remember the RBS warning which in early Jan 2016 said ‘Sell everything’.

From Jan 2016 the exact quote was: “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” RBS said in a note to clients.

FTSE100 in Jan 2016 was 5700. FTSE100 in Jan 2017 was 7340 and more recently hit highs of 7688. A terrible call and one RBS really ought to apologise for. The problem these days, is that the media is fighting for headlines every second of the day. Sensational headlines create panic and fear amongst retail investors and you’ll often find they are delivered to the press at uncertain times. As an example, 6 months ago (June) the Oil Price topped off at $50pb and drifted down to $42pb. Suddenly the newspapers were awash with headlines of bear market…$20pb coming… experienced oil guru’s saying it could hit $10pb. Panic, Panic, Panic, drama, drama, drama, and all this time the Hedge funds and Investment Banks are buying the black stuff and closing out shorts. A week later and PoO recovers to $45pb. The media and press channels go quiet. A few more weeks pass and PoO edges up to $50 (back where it was just a few weeks ago) and yet the media is silent… almost too embarrassed to comment after the sensational reporting of weeks past. Then with PoO edging $55pb, the media and press wheel starts to turn positive. Suddenly OPEC is working. Oil gluts are gone and $65pb year end predictions appear and the $20pb predictions slip back into the shadows. It’s ugly stuff to watch. But that is where we are these days. The Markets have become unpredictable almost casino like. Share prices are driven by herd behaviour and money volumes rather than news flow or valuation metrics. It’s normally a trait of AIM traded stocks. A junior market where anything is possible. You’ll find some companies selling chocolate fireguards with markets caps of £50m and retail investors still pricing in (or expecting) p/e values x 10. But every now again, you’ll find the opposite. A company which has terrific cash growth potential, limited debt and solid earnings forecasts priced at bargain bucket levels. Seemingly ignored or just not the flavour of the month… until the herd arrives of course! Multibaggers aplenty – AIM has the ability to make millionaires out of many Retail Investors and conversely make many bankrupt. That’s the attraction and appeal. There is no recipe for success. It’s a minefield out there. But if you spend sometime researching, understanding the business and the threats and risks, then without a doubt, you’ll increase your chances of survival and maximise your chances of making a profit.

Week 52/Final Results Below, along with a short summary for TheShareHub top ten.

Summary of ShareHub Hotlist 2017: (in no particular order)

  1. Enquest – Scuppered by delays on flagship Kraken asset. Broader folio of producing assets showing declines. Debt pile likely to take longer to reduce. Net result… unwanted and ignored by investors. Not likely to change until the market sees evidence of growth and debt repayment/reductions. Market deploying wait and see policy.
  2. Faroe – In transition phase from explorer to major mid tier producer. After years of avoiding debt, the company recently took on an unsecured bond to finance new developments. Market deploying wait and see policy.
  3. Futura Medical – Disappointing year with failed marketing contracts and weak demand for leading products. Needs to get a shift on before wider market take advantage of IP.
  4. Hummingbird – Delivered everything that they said they would. On time, and on budget. First multibagger of the year for ShareHub top ten picks. Plenty more to come in 2018 as the gold flows and the cash rolls in.
  5. Hurricane – I would like to say they ‘delivered everything that they said they would’ but that’s not quite the case at all. Preferred farm out deal did not come through which forced management to go it alone with first phase eps. Hefty dilution and debt put a cap on any major share price progress. Disappointing but future looks bright if they can deliver first oil on time and on budget. As proven by Enquest/Kraken – this is no easy feat and big risks remain.
  6. Ophir – One of those head scratching moments. Trading at all time lows against a 40% PoO recovery. Makes no sense. Delays on Fortuna project disappointing. Market deploying wait and see policy with regards to funding issues, wary of potential cash raise / dilution ahead.
  7. Premier Oil – Delivered first oil from Catcher on time which is a major achievement but market deploying wait and see policy due to historic failures on other developments such as Solan. Mexico exploration success potentially massive but concerns over recovery potential, government tax share and licence boundaries holding further exploration back. Debt pile a concern and needs to reduce before proper rerating. Broader folio performing well and E.ON acquisition a real steal. CB’s a drag on share price.
  8. Quadrise – Dropped heavily on Maersk withdrawal but rebounded well with Saudi/Japanese opportunities. That said, late RNS on Friday shows that progress will be slower than investors had hoped.
  9. Tullow Oil – Another head scratcher. PoO up 40% and Tullow down 21%. Rights issue has clearly had an effect and debt arbitrage (shorts) playing their part to cap share price gains. Importantly – production solid and debt reduction underway.
  10. Ithaca Energy – started the year without Stella Production and was bought out by Delek Oil before investors could see the fruits of that 5 year project. 99p in Jan and sold for 120p. 20% gain inc initial funds reinvested into Providence Resources in May.
  11. Providence Resources – Sub’ed in for Ithaca and unfortunately failed to deliver on the hype of huge exploration drill in Celtic Sea. Recovered towards year end on news of additional farm outs and Barryroe exclusivity agreement. No matter what one says, PVR management team keep on delivering shareholders HUGE exploration opportunities with minimal cash outlay through farm outs. 2018 looks like another exciting year but it could be slow going again.

That concludes 2017. Disappointing after the huge 130% ShareHub top ten performance in 2016 and it was always a tall order to match that. That said, with PoO some 40% higher, I firmly expected to see the 2017 ShareHub picks in the blue and not in the red. The 9.75% fall could have been worse and the late recovery (roughly 15% up in last 3 weeks) perhaps hints that the delayed recovery in some oil stock picks is now underway. Bodes well for 2018? We shall have to wait and see.

The 2018 ShareHub top ten picks will be announced later today.

ShareHub Hotlist 2017 – Week 51

Merry Christmas to all ShareHub readers. It’s that time of year when even the Algo bots, black boxes and HF power houses look like they’ve been on the mince pies. Certainly signs of fluidity in prices as we enter into the last week of the trading year.

Week 51 closes with more gains for TheShareHub top ten which is putting in a pretty good effort to close out in single digits for the year – albeit in the red. A few weeks ago, performance was -23%. No such worries for the Telegraph or Daily Mail picks. Both are on course for a very respectable ‘teen’ percentage rise. Still neck and neck between these two and unclear on which one will come through the ultimate winner.

Looking ahead, TheShareHub will issue top ten picks for 2018 on Dec 30th. If you have a stock that you think will be a top performer – then throw it into the hat using the comments section below.

Week 51:

 

ShareHub Hotlist 2017 – Week 50

Not long left to year end and it’s looking like another terrific year for major US indices. DOW, S&P and Nasdaq all setting new highs for the year. Across the pond, Brexit has capped the FTSE100 at under 7500 levels for months with no sight of 8000 being tested anytime soon. That said, if commodities takeover the bullish trend in 2018, then the FTSE100 should stand a chance of breaking 8k as BP, Glencore, AngloAmerican and others should edge higher. Markets will need a helping hand from China in terms of growth and commodity demand. Thus far China has shown some strength against weaker market expectations. US Tax breaks should keep the US economy going strong which in turn should feed through to China. The biggest indicator of all for commodities is M&A. It’s been lacking in 2017 and it’s a sign that caution still rules the roost at present time. After a few quarters of positive earnings and some signs of debt reductions across the sector, the predators may begin to swoop on companies that are vulnerable to low ball offers. Shareholders can become ‘bored’ and ‘impatient’ and no one likes to see cash values trading sideways. If predators present decent offers that bring forward likely ‘realised’ valuations by 12 months – it might be hard for some to turn them down. Companies that are certainly vulnerable to M&A are, Petrofac, Tullow, Premier Oil, Enquest, Amerisur and Faroe to name a few.

Week 50:
A pretty solid week for ShareHub picks bolstered by a resurgent QFI. The move from 3p to 13p has been fast and just shows how wrong market pricing is these days. Smallcaps are often left to drift to levels that are beyond belief and the process can take months. It’s frustrating for shareholders. But when news comes in good, the turn-around is fast, leaving some on the sidelines stranded. A similar swift turn-around was seen on CERP last week. One moment the stock is drifting down into the low 5p levels and then next it is testing 7p. CERP is due to update the market on production levels before year end and should the numbers beat guidance levels, the share price could be in double digits in no time.

The DailyMail picks lead with the Telegraph a tight second. TheShareHub top ten was the strongest performer and has clawed back over 10% in gains over the last 2 weeks. If it continues like that, it could be a blue end to the year. I wouldn’t hold your breath on that one, but a recovery all-the-same is welcome.

ShareHub Hotlist 2017 – Week 49

Week 49 is best summed up as another sideways trading week as the markets await the Fed Reserve Interest Rate decision later this week. All the headlines of late are all about BitCoin. It’s astonishing how the ‘establishment’ seem to be left behind on this one. It’s not like the market to be wrong footed and BitCoin has done precisely that. Now with access to futures trading, BitCoin has joined the big boys. It’s not going away anytime soon and it’s going to take a while before the usual vampires like Goldman Sachs and co get their teeth into it. It’s an ‘animal’ of many forms at present and the normal market manipulators (big trading banks, you know the types, the ones that fiddle Libor, Forex and well… just about anything) are struggling to decide which part to grab onto. The tail? The head or just a paw or ear? Everyone wants a slice and like anything that is ‘virtual’ or ‘digital’ it’s anyones guess where it is headed. My guess is that there will be a period of trading whereby some individuals find their BitCoins have chocolate in them. One thing is sure, money is flowing in and out and it’s not currently being washed through the normal large US Banks controlling hands. It’s trading via many exchanges via many people across the globe with many being untraceable. Even HMRC are behind in terms of how to class the profits/gains.  With the Bots and Algo’s in a spin it could be a while before some boffin finds a new way to calibrated them.

In the meantime, GOLD which has been around longer than man and traded for centuries and centuries is apparently under pressure due to this new cryptocurrency. Don’t believe a word of it! Utter nonsense. If there is one thing certain in this world, it’s the precious metal that is Gold. At $1250oz, it’s trading significantly lower due to Fed Rate rise fears and also lack of volatility in markets. When the main markets top off (and they will) and volatility returns, GOLD should edge higher. BitCoin has a future, but after such a good run, would you sell equities and put money into Gold at a low entry level or put it into BitCoin at all time unknown highs? Ponder that for all of a second.

December is usually a month to get news out before year end. Companies generally want to get ‘bang for the buck’ with good news releases hence better to announce these when Markets are still sober and not too punch drunk from the festive period. With the calendar showing week 52 as virtually a non starter due to holidays, companies would be wise to get good news out either this week or early next week. Any later, and it could be forgotten or missed. Thus far, some companies are getting news out there now with Hurricane Energy getting their CPR out early doors. Other stocks covered by TheShareHub such as WRES and SOLG have issued news worthy updates which should see the share prices progress higher in 2018. Other news has yet to arrive with CERP and HUM due to update the market on production levels and first Gold pour respectively. Finally, AMER is certainly a puzzle. PoO has doubled in price from lows. AMER’s production has doubled from lows. And the share price has halved from highs down 17p to 17p (previous highs 34p). Crazy stuff but that’s what happens when you have a large investor who seems intent on offloading stock in a very poor volume market. When the selling stops, AMER should move higher with ease as the business progress in 2017 is worth 34p a share and not 17p. That’s a huge valuation gap to fill but when it happens, I suspect it will happen fast. No guarantees of course.

Week 49:

Daily Mail and Telegraph continue to go toe to toe and it’s going to the wire. TheShareHub picks will do well to finish with minor blushes circa 10% down but anything near 20% down is more than a bloody nose. No matter how good the 130% increase was last year, it’s not nice to see a fall at anytime. PoO’s done its part yet Equities have lagged considerably and that has to change at some point in the future as it makes no sense at all. A few quarters of decent earnings and debt reductions will see many of the mid cap sector bellwethers like Tullow, Premier Oil and Enquest do well.

Note: The data on the Telegraph is incorrect but the percentage increase is fine. Since LSE change over to various currency and decimal points, data feeds have been all over the place and some providers like Interactive Investors are still struggling to get data feeds to work properly after 3 to 4 weeks of LSE changes. Not acceptable and clients should seek some kind of compensation from ii and others for not supplying the service that they advertised. If you don’t ask, you don’t get! And if you don’t get… move your business to another provider.

ShareHub Hotlist 2017 – Week 47

The tussle between Daily Mail picks and Telegraph top ten continues with the pair swapping places again. Nothing between these picks and more girations to come no doubt as we enter the final few weeks of the trading year. As mentioned last week, the markets/indices do look a little punch drunk. Question is… do they have some legs left to deliver a Santa Rally? Some analysts are already pen’ing in double digit growth for the indices in 2018. Anything is doable in this casino market but 10%+ would put the DOW at near 27k levels. That’s more than toppy. The Commodity sector is certainly one to watch as the rebound has been slow compared to the blue chips / major indices. Many equities have lagged commodity rises and this is blatantly clear across a number of heavy debted companies like Tullow, Premier Oil and Enquest. It’s down to these companies to prove the market wrong and deliver the doubters with some figures that blow expectations away. A few quarters of strong cash generation and debt falling should be enough to kick start some rerates. Of course, to do this PoO will need to be stable and supported in the $60’s. We’ll find out the Saudi’s, Russian’s and OPEC’s view on Thursday Nov 30th. News may filter out ahead of then but Thursday is the big event. In the past, the market has tended to ‘sell the news’ but the sell off doesn’t usually last long before prices are bouncing back.

Stocks of note over the last week are AMER, SOLG, HUM, HUR, OPHR and FPM. The first two are via the ‘heads up’ coverage. AMER look on track to deliver some very solid production numbers in Dec with Mariposa-1 now contributing to cash flows. The company really is in the best shape I have seen it in over 2 years and with PoO in the $60’s, it’s going to feel more like PoO in the $70’s based on AMER’s OBA pipeline $10pb (approx) savings.

SOLG has drifted along for a few weeks now as the banks complete the distribution of the £40m bought deal to selected clients. The news should be thick and fast over the next 6 months+ which puts SOLG top of the wish list for the sharehub 2018 picks. All will be revealed on Jan 2nd.

Hummingbird Resources are quietly delivering on all their promises with Gold pour on time and budget for end of Dec 2017. The way progress is going, it would not surprise me to see a Gold pour happen a week or two before then. Thereafter, 2018 looks like a year of rerating for the business.

HUR has been drifting for months now as it loses it’s high impact exploration shine and moves into the boring phase of development. That said, it’s not that long now before first oil in 2019 and I would expect the share price to recover as time ticks on and development milestones are passed. One highlight to watch out for in Dec is HUR’s updated CPR. Dr Trice will be keen to get this out after making several improvements in modelling and subsequently on commercial terms.

Ophir Energy is another ‘drifting’ stock. Like HUR, they too have a large development project (Fortuna) although the difference is they are still looking to get sanctioned and fully financed. News last week hints that an indicaton on financing terms will be outlined to market circa Mid Dec. OPHR is languishing at all time lows so there’s plenty of upside and growth to come should they please the market with Fortuna funding terms.

Last up is FPM. Faroe have been tickling along nicely and with PoO in the $60’s, the cash should be rolling in especially as they are essentially cash rich and debt free. That said, the recent bond deal and move to advancing development projects will turn FPM into a more typical ‘debt’ balanced E&P company. I say ‘balanced’ as the debt is moderate and not excessive.

Overall, plenty of news to come in Dec and with a bit of luck and guidance from OPEC, the PoO sensitive stocks should do well. Of course there is always risk to manage and examples that AIM is not the only hotbed of coals out there can be seen via the likes of Centrica, Mothercare and Carillion to name a few. The blue chips and large mid caps have big risks too and it feels like we are entering a prolonged period of ‘change’ from the ‘old’ to the ‘new’ as technology and the fast developing digital world rewrites the way we do things on a daily basis.

ShareHub Hotlist 2017 – Week 46

Much of the same. Drifting along awaiting a number of newsworthy events such as OPEC meeting, UK budget, US tax reform, Brexit, the list goes on. The US market looks like it needs a break after a bullish period which has seen the DOW rise from 19800 to 23800. That’s not far off 20% growth. That’s massive for a Major indice like the DOW. In contrast, the FTSE100 has risen from 7150 to highs of 7560. It’s barely up 5% as I type. Across the commodity sector, in Oil&Gas, PoO has had a great run, up from lows of $42 (wti) to recent highs of $57 in 2017. That said, it is actually up just $3pb from Jan 2017 levels. Looking at some sector bellwethers, SHELL are trading at highs last seen when PoO was in the $100’s. The likes of Tullow Oil and Premier Oil to name just two are trading at levels last seen when PoO was in the $30’s. Astonishing gaps and disconnects in market valuations compared to previous months or years. The mind boggles at what is going on as it has no obvious rhyme or reason. It’s just not normal to see these disparaties without any meaningful moves of late to correct them. Instead, the market just seems to bob along like it’s on autopilot but with no idea of the destination it is headed for. What does this mean for investors? Well, one word would do it and that’s ‘caution’. When markets begin stumbling around looking punch drunk, you need to sharpen up and get ready for what may come next. It could be volatile. One go-to metal when uncertainty is around is GOLD. Recently, the trading on GOLD has been odd to say the least. Over the last few weeks the commodity has seen sharp price spikes of $10 per oz. Again, it’s the unusual nature of these that raises the eyebrows. It would not surprise me one bit to see POG head higher over the next few weeks and considerably higher in 2018. Dollar weakness is causing issues across a number of pegged commodities and with Bitcoin going bonkers, I feel the market will once again turn to the solid and reliable nature of GOLD. Getting a decent GOLD equity/stock into the folio as protection or a decent hedge is never a bad idea. There are plenty of stocks out that that offer exposure to POG upside and not all are the same. Some have high AISC’s and others have very low AISC’s. It’s the latter that often move faster and rerate when POG moves higher as they see greater upside to the cash flows. Hummingbird Resources is TheShareHub’s star performer for 2017 thus far and it comes as no surprise that there should be more upside to come. The company is on budget and on track for first Gold pour from their Yanfolila mine in Mali and should POG head higher, Hummingbird will be generating seriously large cash flows. Certainly one for the folio if you like the risk vs reward that comes from early phase production miners.

Week 46 – A weak one for commodities.

The Telegraph opens up a gap again after being challenged a couple of weeks ago by the Dail Mail picks. It’s still unclear which one of these will take the winners spot at this stage. The ShareHub top ten slipped back to levels last seen when PoO was in the $40’s. Very odd considering PoO is just a few % off 2 year highs. It’s going to take something very special if the wooden spoon is to be avoid this year.

Roll on next week. Note, OPEC meet on Nov 30th.