Share Hub Hotlist – Week 41

Not a great deal of action over the last week and a bit of consolidation across many stocks which was much needed after some pretty decent rises.

Commodity prices continue to show signs of strength and despite the contrarian reaction to hefty Draws in oil supplies, the market is beginning to ‘fear’ the upside potential vs the downside. There are times to be bearish and times to be bullish. After 2 years+ of oil rebalancing acts via OPEC and the Russian’s, we might not be too far away from hitting the point whereby we start fretting about not having enough supply to meet demand. Markets used to be sophisticated but are now quite dumb. This means you get exaggerated moves in both directions. In PoO’s case, the possibility of PoO over running its true value is highly likely. A break of $60pb (brent) has not been seen since Q1 2015. Hence, it’s a long time coming and when it arrives (and I believe it will) it should test $65pb (the previous highs set in (Q1 2015). Other factors come into play which effect prices such as forex/dollar movements. The dollar is seen as weakening over the next few weeks/months which is normally a bullish indicator for crude. How long it can hold above $60pb is anyones guess (in this crazy market) but the Saudi’s look like they mean business and the Russian’s keen too.

The next big OPEC meeting is set for Nov 30th. However, it is widely expected that preliminary discussions will occur prior to the big event suggesting that a deal could be hammered out/agreed in the coming weeks. Compliance amongst OPEC is still a key piece in the jigsaw and this meeting will no doubt make that point very clear to all attending. At present, the market looks like it could handle a continuation of the current cuts to March 2018. Any mention of extending cuts beyond March 2018 could see a strong swing higher for PoO. Certainly an issue to keep an eye on if you have producing Oil companies in your folio (especially debt heavy ones). Metals look strong too which is the main reason why the miners have been so strong of late. Gold is normally the go-to precious resource when volatility and risk rises in the markets. There’s certainly plenty of concerns out there (North Korea/Iraq/Russia/Brexit/Spain/US/Iran the list goes on, yet the market (still acting dumb) doesn’t want to entertain it. It will be interesting to see what happens to Gold when the herd come rushing in should one of those potential risks become something that cannot be ignored.

The Telegraph picks looking strong but as mentioned earlier, it’s a case of much of the same for week 41.

Good progress on CERP, AMER and PANR (3 heads-up stock picks of last few weeks). All have busy news periods in Q4 which should provide the catalysts needed to keep the momentum going and share prices higher… assuming the news is good of course.

Week 1 to 41 – Current position

ShareHub Hotlist 2017 – Week 40

The Telegraph picks are steaming into what looks like a nailed on victory. TheShareHub picks can take some glory in notching up a multibagger in 2017 (all down to the HUM team) but the rest of the picks really need to pull their stocks up. It’s tricky out there at present. Investors are taking risks with O&G companies in a volatile market yet gaining very little reward against the recent PoO recovery. Tullow, a popular bellwether for the sector have done nothing wrong yet still trade in the 180’s which is odd considering the price was 300p+ just 10 months ago when PoO was $52 (Just $3 shy of today’s prices). There are other examples out there which show ‘selective’ buying/building by the bigger money players. Looking at the super glom’s as I call them, Anglo American and Glencore, both are doing very well in 2017. This time last year, Glencore was 220p. Today its 364p+. Anglo A. was testing the 1000p level in Oct 2016. Today it’s testing the 1500p zone. These moves in prices are not in the millions but in the billions. Last time I looked Glencore was worth around £53billion! So how does the market happily add £17billion (50%+) to Glencore’s cap yet struggles to price Tullow at over 200p or Premier Oil at 100p+. It’s a puzzle. Surely it’s not too much to ask to see some sensible valuations return to the debt heavy companies like Tullow, Premier Oil and Enquest to name a few? Perhaps the next 3 months or 6 months could be their time? For the moment, the smaller caps / penny shares are showing signs of decent money flows again. Bolstered by some astonishing multibagger successes like FRR, EME and UKOG, the private investor is beginning to make their weight known again. Long may it continue.

Outside of the top ten picks, TheShareHub gave ‘heads ups’ on CERP (3.9p, now 6.45p), PANR (45.5p, now 59.5p) and AMER (19.75p, now 19.5p) recently. The first two have performed well and should continue to do so over the coming weeks assuming newsflow is good (and there should be plenty of it). AMER (like Tullow) seems to have been forgotten and left behind. It’s still trading at levels that were last seen when PoO was in the 30’s and their production was half the 7500bopd it is today. AMER is debt free and cashflow positive. It really shouldn’t be treated like a Tullow. Still, it only takes a few days corrective trading and AMER could be 26p/27p again without anyone batting an eyelid. That’s todays crazy market for you! Sloppy? Complacent? It’s like the brokers and analysts have finally given up the ghost or are just tired of trying to price stocks fairly. As mentioned before, it’s more a case of ‘show me the money’ than ‘we’ll price in some good news’ ahead of forecasts. Markets are not looking forwards very much of late, and appear to be simply taking each day as it comes. This environment tends to leave valuation gaps or disconnects between share prices and fundamental valuations. Finding and exploiting those gaps is the number one game. Today’s news that Schroders have taken a near 10% holding in CERP is a good sign for all tired commodity small cap followers. It might be a one-off or it could be the beginning of a new cycle which sees the bigger money players returning to speculative small cap players which are undervalued and have great assets. The funding market may still be tight, but if it does open up again, then minnows like WRES.L should rerate. It’s access to funding / capital that is holding many of these minnows back.

As per usual, not without risk and nothing is a shoe in these days. Roll on next week. It’s beginning to feel a little better out there across the commods.

ShareHub Hotlist 2017 – Week 39

A much better week (up 4%) for the commodity heavy ShareHub top ten picks for 2017. Q3/Q4 is historically strong for Commodities so not unusual to see some bullishness entering the market regarding Oil and Gold. Trafigura and Vitol have both piped up recently with noises that are bullish which can mean one or two things. One… they see a near term pullback in Crude and so in true Goldman Sachs style, are pumping out bullish stories while selling behind the scenes. Or Two… they generally see more money to be made between $55pb to $65pb and would prefer that range. One thing is sure, neither Vitol or Trafigura really know what is around the corner. Will $60pb+ oil simply see Shale producers lock in forward sales and safe guard future production? Will $60pb see OPEC return to normal supply levels in March 2018 once the extended agreement ends? These are the true catalysts and drivers near term. However, it is becoming more clear now that the rebalancing of PoO is here and I would urge all to move attention  away from ‘supply’ and instead focus on ‘demand’. If the latter continues to rise, then there is a genuine threat in late 2018 or 2019 that the supply market will not be able to meet the demand. Oil reserves and development projects are now at there lowest for years due to lack of investment. It could take a year or two before supplies ramp up fast enough to deliver on demand. That’s now a bigger threat and in theory should be sounding warning signs across the market. But in true ‘casino’ style, the market tends to ‘react’ rather than ‘predict’ these days. A sloppy and lazy approach which spanks of complacency and lessons unlearned from 2007/08. For many Oil Guru’s, most know that bull phases come in cycles and that it’s the norm to see volatility in prices when in transition from Bear to Bull. For the time being, the market is ignoring the signals which brings valuation gaps aplenty across the equity sector. Heavy debted players are slow in rerating in periods of uncertainty, but when the picture becomes clearer, I would expect them to move up fast. As mentioned last week, ‘short’ positions have mysteriously dropped over the last few weeks. The dark cloaks retreating into the shadows with no fanfare or media party headlines heralding bull markets, just silence. Sometimes ‘silence’ is a great tool in investing or trading. It can mean many things dependent on the context. If a company that is normally buzzing with news goes quiet, it normally means bad news is on the way. If the hedge funds are ‘short’ on crude, you’ll see the paid media channels issuing bearish headlines and Oil Guru’s wheeled out citing $20pb. Then when the bets are in place, the bullish stories appear. Understanding how ‘news’ headlines appear and ‘why’ is a constant guessing game but it’s becoming more predictable by the day. The market and the main players involved with it cannot help themselves from ’embracing’ the new media world that is out there. Gone are the days of leaving a ticket or tip sheet on the trading floor. Gone are the days when investors read broker notes and believe every word. Gone are the days when anyone actually listens to anything Goldman Sachs says… without a huge dose or pinch of salt. It’s an ever changing market out there and you have to keep on your toes or you’ll be run over… by something… contrived or genuine. I’d like to think investors are smarter today and lessons have been learned from 2008 and commodity bubbles or any bubble for that matter!

Week 39
The newspaper picks lead the way with Telegraph in a comfortable lead. Daily Mail picks hanging in there and ShareHub picks beginning to show signs of a long coming rally. A 4% gain per week for TheShareHub would see the picks in the blue by Mid Nov. Certainly doable if PoO can get through $60pb in coming weeks. After the gigantic 150% rise last year, a moderate result in 2017 would be more than acceptable.

Other stocks to watch which have been given the ‘heads up’ are CERP, AMER and PANR. All three are in transition in terms of production with numbers on the way up. All three are virtually debt free and all three are low cost producers. Cash flows should be pouring in Q4.

ShareHub Hotlist 2017 – Week 38

First proper week back after the summer pills and thrills. It’s not just the seasonal changes that you can feel in the air. Commodities look back in demand. The only tricky thing now is which ones are going to perform better than others?

With Global risks aplenty, it feels like a sequel from Austin Powers out there at present and not a good one at that. We’ve had Brexit…, we’ve had Trump, we’ve had North Korea and in the not too distant future we will be hearing alot more about Mr Putin with Russian elections fast approaching again. During this pantomine, we’ve seen POG (price of Gold) rise roughly 30% in 2017. Historically, you only need to look back 5 years to see Gold testing $1650oz. And 12months before that $1900oz was on the table. With major indices such as DOW, S&P and FTSE100 at close to all time highs, there is plenty of room for Gold to rise should investors decide to flock to safety. History shows us that bull and bear runs come in cycles. With Major indices punching higher highs, it might not be too long before Gold gets its turn to put in a new high itself. For the moment, it’s building momentum in the early $1300oz levels leaving a few bullish analysts out there to think $1500 could be the new level to launch from in 2018. As previously highlighted on thesharehub top ten picks, Hummingbird Resources (HUM) is a stock which has all the right pieces in place ready for first gold pour in Dec 2017. At 34p a share it’s valued just over £110m. That’s pretty cheap for a company expected to produce 130,000oz of Gold in the first year with AISC’s of just $698oz. Should POG get to $1500oz+ as some suggest, the cash generation would be astonishing for a smallcap player. That all said, it’s the management team that looks worth its weight in Gold. Mr Betts and team look the real deal and are respectful to their shareholders. A trait that some Aim listed CEO’s should take note of. The next 3 months are ‘big’ for Hummingbird and the market is likely to rerate the stock higher as they continue to make good noises on progress towards first Gold pour.

Next up is the other gold… Black Gold. Now, it’s been a very long time since anyone has been bullish on Crude or Brent. But as the leaves begin to drop from the trees, so do the short positions across a number of bellwethers like Tullow, Premier Oil and Petrofac to name a few. So what’s happening? Why are hedge funds cutting short positions? Well, there seems to be increasing evidence that the rebalancing act via OPEC and NON OPEC is indeed working. But that’s not all. Elsewhere, production is falling and falling fast. US shale is finding it harder to get funding. Wells are drying up and not being replaced. Rig counts are falling again. Politics is also playing a role. It’s beginning to feel a little nervy out there. The big traders like Vitol and Glencore seem to be hinting that oil demand is rising faster than many think and new supplies are limited. If true, then in late 2018 or early 2019, it could be a case of $90 oil again. Much depends on Saudi’s and Russia’s ability to bring on fresh production but with Saudi’s eyes firmly placed on an Aramco IPO in the not too distant future, it’s possible that they might just keep the taps turned on half speed.

So.. if an oil rally into the $60’s is coming… soon, which stocks are looking cheap and which stocks are lined up with news flow… just the sort of stuff to keep momentum flowing?

Tullow looks good. Premier Oil looks good. Even Enquest looks good. Infact many stocks out there look good with PoO in the $60’s. But the following three are of interest for different reasons and the sharehub thinks these could outperform the above.

1. Columbus Energy Resources (CERP) Price 4.2p. New Exec Chairman looks the real deal. If he delivers what he promises (and he does seem mighty confident) then this stock could quadruple or five bag to a range of 20p to 25p.

2. Amerisur Resources (AMER) Price 18.75p. Director buys and recent Mariposa-1 Discovery suggests better days ahead. With cost per barrel down to $15pb, cash generation is going to be significant for this debt free company. Target 50p.

3. Pantheon Resources (PANR) Price 49.25p. Delays to ops due to Hurricanes and Rig availability means this one has a doorstep sandwich size filling when it comes to news over the next few months. Transformational ‘first’ gas sales via pipeline are due to commence in or around end of year which should turn this company into a self funded cash generating monster. It was trading at 180p last year and might not take long to get to those dizzy heights again if ops perform as expected. Target 90p y/e.

All three are not in thesharehub top ten for 2017 but are very likely to make the 2018 list based on forward work plans.

Overall, the top ten picks for 2017 are underperforming and after last years massive 150% rise, it’s disappointing to see many drifting along. But with the last 3 months of the year historically strong, there is still some hope for a late rally.

Week 38 looks like this: Telegraph picks leading the way. Daily Mail hanging in there and thesharehub picks needing some strong moves in PoO to avoid the wooden spoon this year.

Sharehub Hotlist 2017 – Week 37

I hope you all had a good summer break. St Legers day has passed so the old mantra of sell in May and return after St legers day requires some brief analysis. On an Indices basis, the FTSE100 hit all time highs in May closing the month out around 7550pts. On Friday, September 15th (Prior to Saturday’s St leger day) the FTSE100 closed at approx 7215pts. In terms of Oil, Brent prices hit highs of approx $53pb and as of Friday, Brent prices were testing $55.75pb. A mixed bag then. Clearly selling the FTSE100 in May made sense although the interesting thing to consider is that Brent prices strengthened as did other commodity prices. Considering the FTSE100 is heavily weighted to commodity stocks, one would have expected more strength on the index. That said, it is just one day into ‘post st leger day’ trading and a few other FTSE100 sectors have taken a bit of a beating of late.

TheShareHub will be back to posting with the normal frequency here on and after the summer drift, some much needed growth is required from the hotlist picks if they are to avoid collecting the wooden spoon this year.

Week 1 to 37 Results below.

It’s been neck and neck for both the top newspaper tips. Both showing a very respectable 20% gain. Still 15 weeks to go and anything can happen in that time.

Stocks to watch over the next 3 months from thesharehub picks in particular are: Hummingbird Resources, Premier Oil, Faroe, Ophir, Providence Resources and Tullow.

Other stocks noted on sharehub over the last few months expected to perform well in Q3/Q4 are: Amerisur Resources, Pantheon Resources, Petrofac, and Imagination Technologies.

More updates and comments across a number of stocks to follow over the next few days and weeks.

Sharehub Hotlist 2017 Week 28

Federer strolled to a record breaking 8th win at Wimbledon. The amount of wins is impressive, but it’s his ability to stay fit and strong that is his secret to success. He rested his body when others were battering theirs. He targeted the slams and ignored most else.

Investing is very similar. You have to know when to reduce exposure and when to increase it. Summer periods or the ‘sell in may’ mantra has long been a period for ‘reducing exposure’ and proven to be fairly successful. So how many of you sold in May and plan to come back in Mid September? With major indices at all time highs, 2017 could be one of those years where selling in May delivers losses or missed profits. In terms of commodities, it is widely expected that H2 is the period whereby PoO and other commods will deliver growth as they bounce back from years of being out of favour. For many PoO related equities, most are at 2017 lows. That’s incredible considering the ‘worst’ should be over for PoO. OPEC cuts are now 7 months in and compliance remains strong. US crude draws are rising by the week, US shale is stuttering ans the Rig count which was rising by roughly 20 to 30 rigs per week is now virtually at a standstill. Floating storage vessels that were containing millions of barrels of oil have been all but expended. China demand has been higher than forecast and there is a crisis looming in the middle east as Saudi’s take unprecedented action against Qatar.

Yet here we are with PoO at below $47pb (wti) and the hedge funds virtually ‘all’ net short. It seems a peculiar position to be in. One would normally expect the opposite. However, if you look back to 2016, you’ll see that many casino type hedge funds went under – some survived but made losses that are eye watering. All called the PoO recovery wrong. They were short then and they got spanked. In late 2016, they switched tact and went net long. But after just 3 months many were switching back to net short. Talk about being impatient! So here we are again, approaching a period whereby the data supports OPEC actions but the hedge funds defy common sense and remain short. If history repeats itself, some are going to go under again assuming PoO finally breaks into the mid $50’s again… which is long overdue.

August looks set to be one of the strongest months for PoO as Saudi’s pull more supplies off the market to manage demand closer to home. The US data could see huge draws over the coming weeks. Of course, this requires continued OPEC compliance and there have been a few signs of late of some OPEC members filling the space made by Saudi cuts. That’s not good news and it comes as no surprise that the Saudi’s have called an EGM for July 17th (today) although this is still rumoured of course. OPEC are set to meet Russia the following week on July 24th, so one imagines they will need to have their stall in order if discussing further cuts or extensions which they want Russian to be part of.

Top ten picks results based on 28 weeks as folllows:

Good performance by the Daily Mail picks as they shoot to the top. It’s been nip and tuck all year for the Telegraph and Daily Mail. Who will win? One thing is sure, the sharehub top ten need PoO in the mid $50’s or higher if they are to mount a challenge of any sort. That said, after the 150% growth rate of last year, the current 14% gains look pretty poor by those standards. On side note, it should be highlighted that many of the newspaper top ten picks deliver dividends which are not factored into the % increases. It’s not usually more than 4% to 6% but should be considered in the bigger picture.

Stocks to watch out for July/August…

PMO is due to update on Zama-1 DEEP as well as possible deal on Tolmount licence. Faroe should have news on Brasse sidetrack. PVR could deliver the summer blockbuster drill result that all investors dream of. They have two targets back to back and part of the same drill. So if the first is a duster there is always a chance te second could deliver. And finally a mentioned for Hummingbird Resources who are quietly going about their business at the Yanfolia gold mine. It might take a few more weeks or months of finalising the development and derisking it before the market finally rerates the stock but for the moment, the sp is lagging fair value by some distance. The stock should be into the 30’s by now based on comparison to peers. An update from the company should be coming in the next few days or couple of weeks.