It’s hot hot hot out there but cool as ice across the commodity sector. The summer heat has cooled some of this years earlier gains but the ShareHub top ten picks remain firmly in the blue and are out performing the newspaper picks for now. It’s a curious one as the newspaper picks are generally selected by investment guru’s and tend to be safe bets aligned to FTSE100 in many cases. The latter has done reasonably well of late touching 7750pts not long ago, yet the newspaper picks have slumped by roughly 10% which is a hefty slide. The AIM market has seen quite a few fundraising rounds across a number of small miners and oil plays. Frustrating for long term investors but better to tap the market now while the sun is shining than try when clouds are gathering. With the DOW edging closer and closer to pre-trading war levels circa 26000 the question is… what’s changed today? Turn the clocks back just a few months when trade war talk commenced and the DOW dropped from 26500 to 23000 levels causing the usual paid media channels to declare bear markets are upon us, panic panic panic. The usual short sighted media headlines that disappear the next day along with the journo’s and pundits behind them…slipping back into the shadows. So here we are today… Brexit on a knife edge, US and China in full trade war, UK interest rate rises and Elon Musk self capitualating and handing all those Denver firms which fear him most a life line. Like Boris Johnson, the best Elon can hope for from here on is to slip into the shadows. All credibility shot. Boris could have earned some stripes by standing down over Heathrow but instead he opted to use his joker card to add pressure to the PM over Brexit. A cheap shot but befitting of a man that does not keep his word. In a world that lives and breathes on social media, it’s inevitable that many well respected individuals end up shooting themselves in the foot. Twitter is like wearing a mic on a 24 hr basis. Some would do well to ‘drop the mic’ and manage their vocal rants behind closed doors…Trump included.
Week 31 status below – The ShareHub has been quiet during summer period, but will be returning with more regular updates in Mid September. The summer should be enjoyed and the stock market is sloth like during July/Aug. Selling in May and returning on St Legers day is proving a winner at the moment.
That’s the end of H1. Performance best summarised as ‘mixed’. Commodities have without a doubt been the main story in first half of 2018 with Oil prices jumping almost 30% in the period from lows of $62pb (wti). You wouldn’t know it looking at some Mid cap Oil producing bellwethers like Tullow although PMO has certainly put on some weight with TheShareHub 2018 pick rising over 65% in the period. The stock is still a country mile away from where it should be with Brent prices at $80pb but what’s the rush? The casino wants to see more evidence of the oil supply issues that have surfaced since Trump’s size elevens kicked the Iranian nuclear deal out the park. What Trump did not see coming was the virtual capitulation of Venezuela, Libya, Nigeria and many other suppliers. What’s worse for Trump and the US is that recent data released by the EIA shows that the US rig count has began to fall at a time when it should be rising. Not only that, but US gross production which was growing at around 100k barrels per week is now treading water at best. Numbers remain unchanged for the 3rd week running. As many know US figures can be fudged or played around with and some more cynical observers out there believe that these figures are often tweaked to suit certain market needs… tut tut. Speculative nonsense aside, the recent numbers look like US shale is stalling or may have peaked or the numbers were inflated in the first place. Take your pick. The problem for the globe now does not rest with OPEC alone. Trump’s inability to understand how the oil market works and his actions on Iran could well see the likes of Vitol and Glencore on his back as these Oil traders will not be able to keep Oil prices low when ‘real supplies’ are becoming scarce. And that’s the reality. The Saudi’s and Russian’s may open the taps but it’s not going to be enough to stop a massive oil spike based on Iranian sanctions fully in place come Nov 2018. Furthermore, the Saudi’s are keen to get the Aramco IPO off in 2019 which means they are in no rush to burn reserves simply to keep prices down. That said, the question lingering now in the market is how fast the likes of Russia and Saudi Arabia can raise supplies? After years of lack of investment, there are no big production projects (non OPEC and OPEC) ready to come back into the supply line. Most are years away from first oil. Many old producing assets are beginning to run dry with decommissioning common place across the north sea and others areas of the globe. If the Saudi’s struggle, then Trump and co will need to work very hard on the likes of Vitol and Glencore if they are to contain or stop Oil hitting $100pb. Do not be surprised if you see Glencore suddenly being sanctioned or pressured by the US. The US are in a desperate position as come Nov 2018, Iranian sanctions kick in and the market might not be in a position to allow it to happen. Vitol and Glencore can’t simply invent the black stuff to massage numbers… well not on the scale that could be required to prevent PoO breaking through $100pb. Should the $100pb barrier be broken, Trump will be the reason why it happened. And that’s going to wear very heavily on his popularity as business and consumer begin to get squeezed at a time when Trade Wars are already hurting.
Moving on to the real ‘global show’ at the moment… the World Cup. For a change the headlines are all about dreamy school boy/girl football. Roy (or now also Jane) of the rovers stuff. Talk about hooligans, fighting, bottle throwing, stabbings etc and you’d be describing a typical average day in London (the new ghetto) rather than a footy tournament in Russia. Hats off to Putin. He’s pulled off the biggest PR stunt that the globe will see for many a year. Russia looks fab and the footy is delivering a change of the old guard on and off the pitch. The names that did not make the cup like Italy and Netherlands raised eyebrows when they failed to qualify for the main group stages. Any trend followers will have looked at those failures and asked the simple question why? If you look at the sides, many of the greats like Pirlo and co have retired. Look at the Spain. A shadow of the great side they once were. Same for Argentina and Germany. Of course these sides will be back but for now the transition from the old guard to the new guard is taking longer than expected. Bit like Brexit. The benefit of younger sides is that they play with no fear. They chase every ball. And they can do it for 120mins. It would not surprise me one bit if the World Cup is lifted by a side not seen before. Could it be Croatia? Could it be Belgium? Or could it be one of the past greats? Last time Uruguay won the World cup was in 1950 (post war). Last time England won the World cup was 1966 of course. All points to ‘change’ when the main event completes on Sunday the 15th.
Week 26 Review:
I mentioned last week that the ‘capital raising’ season was upon us. More and more AIM listed companies are tapping the markets for much needed cash. Some unexpected and some expected. It’s the unexpected ones that feel like a kick in the teeth for long standing pi’s. Some explanations by management are not cutting it either. One hunch is that these companies are being ‘approached’ by IG/City Index and others all keen to manage their book but in need of stock at cheaper prices. The casino can be a pretty ugly place but if true, management teams really need to toughen up and shareholders would be wise to pay attention to salary increases, bonus shares and options that often find seem to get approved before or after a large placing tut tut.
Across the ShareHub picks, HUM.L looks in good shape and cheap at 33p. Exploration has kicked off now and if the results are good, the stock should have a double whammy of great production news and great exploration news. just what the market likes. Add to this the recent 5 month lows hit in PoG and when the latter recovers (and it will) the stock should see additional demand. CERP and AMER should be on the verge of issuing production updates so keep an eye out on those stocks. Both are trading near year lows which suggests there is plenty of upside to come once the good news begins flowing again. AMER have exploration kicking off soon and CERP may well have an acquisition or two lined up that could be transformational.
All top picks from newspapers to theShareHub consolidated in week 26. Not too much to report in terms of performance. H2 does look a better period for commodities although the summer malaise will see lower volumes and reduced interest. One stock that should buck the trend is MATD. After the recent cash raise, it’s not unusual to see some loose stock being sold into market. But with 6 exploration wells lined up of which most are back to back or could be tandem, the news flow and interest in the stock should be massive. The first well is set to kick off next week and the company is set to do a presentation to sellside analysts on July 10th. At 9p, it would not surprise one bit to see the stock in the 20’s or 30’s should the term ‘oil shows’ appear in any interim RNS updates. MATD is part of the ShareHub ‘heads up’ picks for 2018. As with all stocks risks remain so please read the risk warnings in the left sidebar.
In two days time England and Belgium will know who their likely opponents will be in the quarterfinals of the world cup which of course assumes all make it through the last 16. Both teams could find themselves in the bizarre situation of not wanting to win. Ironically, England’s 6-1 thrashing of Panama may well have earned them a quarter final fixture against Germany or Brazil, the two most favoured teams in the tournament. For non-footy fans this must be a tedious read, but even the footy haters out there can see the potential comedy ahead in this match. However, there is still one scenario that could play out which would see the winners of England’s group avoiding both Germany and Brazil… until the Final of course (wishful thinking!). Come Thursday morning, England and Belgium could find themselves thinking about a different match entirely… one that they must win.
Giving the World cup a run for its money in ‘media headlines’ is the Global Trade War which Mr Trump kicked off a month or two ago. The only problem here is that there are no winners. There is no golden boot to award or trophy at the end of this. Just bloody noses, lower GDP’s and a potential recession awaiting around the corner. It’s well known in various circles that you must get your interest rates higher first if you know you’ll be needing the cuts as stimulus further down the line. It’s no surprise to see the Fed Reserve hiking at every given opportunity. The UK and EU will surely follow but have their own ‘Brexit’ headwinds to contend with. The mantra is to hike rates now so you have something to cut in the future. Mmmm doesn’t fill one with a lot of confidence going into 2020 does it?
The ‘cap in hand’ season is well under way across the AIM index in particular. A number of minnows have raised cash via placings which on the whole are 20% to 25% discounted. Some have been opportunistic and not really justified. Which begs the question in some cases why they were done in the first place. It becomes an uneven playing field if the spread betting firms can simply call up a company and get a wedge of stock at 25% discount to cover their over exposed derrieres. Punters have made a few quid out of these companies and of late a ‘new’ way of ‘covering’ risk seems to be underway. In simple terms, if AIM listed companies are not careful, the retail investor will shun them for good. This is the life blood of AIM and spreadbetting firms. The easiest way to please all involved would be to provide investors with ‘open offers’. Allow existing investors to take some 25% reduced stock. In most cases, cash is not required in an emergency situation and as such allows for longer timeframes required to enable OO’s. So no excuses there. AIM Style management teams out there… listen up… don’t abuse your life blood and make sure you give ‘all’ stakeholders a bite of cherry.
Another tough week for commodities with Oil jumping about like a VAR referral system and Gold beginning to look cheaper than Vanilla pods (not quite). Of course, it’s not as simple as fundamental valuations in today’s casino. Too many hedges, Algo’s and products sold 10 x over results in a futures market that actually looks more like the past. The dollar is the main culprit and the sooner the PetroYuan gets established the better. The world needs to move away from pegging to the Dollar and it’s no wonder that the likes of crypto currencies have Wallstreet and co seriously worried. The future is likely to be a world where Oil consumption is replaced with clean fuels and the dollar replaced with digital currency. Between now and then, it’s going to be a battle for all involved – choppy and messy.
Finally, if you want to join Mr Trump in his Trade war games, all you have to do is avoid buying US products and Brands. If EU based, just buy the UK or EU equivalent. The more consumers buy ‘local’ the better. Avoid companies like Amazon and Apple who pay minimal tax to EU/UK. Avoid american beers. Buy craft beers that are wholly owned by homegrown independent brewers but check to make sure even these are not owned by large corporations. Have your say via your wallet.
Week 25 Review – Daily Mail stays firm while Sharehub picks drift lower. The Guardian picks suffered more than most and is now underwater for 2018. Roll on H2 as H1 is ending with a whimper. Most stocks are in a summer haze and news is thin on the ground. There’s not much to add at present. H2 should see a plethora of news from all ShareHub picks with production updates expected from AMER, HUM and CERP in next week or so.
Week 24 certainly didn’t lack spice. Exactly what the casino needed as things were becoming a little dull. Dull makes small coin… Volatility makes big coin. H1 enters its final phase of 2018 bringing with it, Mega Trade wars, Footy fever and Tesla paranoia. Apparently Elon Musk and Tesla are under attack…
“As you know, there are a long list of organizations that want Tesla to die,” Musk said. He referenced Wall Street short sellers “who have already lost billions of dollars,” oil and gas companies that “don’t love” to see solar power and electric cars advancing, and automakers that produce gasoline and diesel vehicles. “If they’re willing to cheat so much about emissions, maybe they’re willing to cheat in other ways?” he said.
Too true Elon. The world is a tricky place when you are single handedly driving change – change for the good. It’s astonishing in this modern day that the likes of VW have not been banged up and the company closed down after Dieselgate. It puzzles me why the US are able to rack up a $30bln bill and force VW to pay it but in Europe (and particularly the UK) litigation is almost unheard of. Well not quite… Slater & Gordon are on the brink of getting VW into court on behalf of over 60,000 owners. UK lawyers are bringing a series of allegations, including that Volkswagen manufacturers defrauded drivers, and that “defeat devices” broke EU rules. Subsequent VW software fixes have from what it seems caused other problems with cars. All in all drivers overpaid for vehicles and are left with a Brand that is no longer trusted.
‘Trust’ is fast becoming the trending word of late as North Korea and US puts its trust in getting a deal agreed which ironically may see a similar scenario to that of Iran. And we all know how that ended up. The trouble with ‘trust’ is that it is only worth a 4/5 year US election term and that’s assuming the acting President isn’t impeached along the way. ‘Trust’ often comes from proven results. Delivering on ones promise. Confidence. But it only takes a wobble here and there and ‘Trust’ goes out of the window. Just ask David De Gea. Do you stick with a butterfingered goalie or replace him with a new one? Trump has achieved some decent deals of late through a bully boy approach but his recent battle with China could be his butterfingered moment. Markets were bolstered by Trump’s America First and keen business drive. The DOW has indeed risen from 18k levels to test 26k levels earlier in the year. But in a trade war, especially one that is protracted, business ultimately suffers due to uncertainty. Just look at Brexit and the subsequent collapse of the UK economy. Markets are right to be concerned as Trump v China will ripple across the globe. Some will benefit from the tariffs and others will suffer. Trumps previous strategies has been to turn on the Tariff taps and then wait for negotiations. Usually these take place pretty swiftly. Then turn off the taps. But here’s the problem. China may not be able to match US $200bln tariff’s as their US quota is more like $130bln at best. But what China can do is drag it out. A long trade war would likely see Trump fall on his sword. China know how to hurt the US, but thankfully are holding fire in the hope that ‘negotiations’ can be completed in the near future. In the meantime, the longer it goes on, the worse it will get. The DOW will find support at 23,500 levels but below 23k and it’s going to be bear market time. In that scenario, 18k is more than possible and the Casino likes that.
Commodities yet again were clouted in week 24. A combination of OPEC fears combined with rising Dollar has put an end to the recent bullish sentiment. OPEC are set to meet tomorrow through to 22nd June to agree output increases. A modest increase of 600kbopd is not exactly going to fill the void left by Iran or Venezuela. Furthermore, After months and months of higher oil prices, the US rig count is beginning to look weak. Where are the new rigs? On a scrap heap somewhere after Dec 2014 OPEC actions is one guess. The reality is US production has increased to record breaking levels but there comes a point where the infrastructure simply cannot keep up. Workforces become hard to recruit. Rigs hard to find. Pipeline materials and backlogs all keep advances in check. The next few months will test out US shale’s ability to scale up in a space that has very little room left. That in itself may well enable OPEC to increase production again in Dec 2018 without making a dent in demand.
Week 24 Current positions:
The DailyMail continues to do well. The ShareHub top ten commodity picks are suffering. It’s astonishing that Gold has not spiked higher on risk off trades. It’s normally the go-to metal when equities look bearish. HUM are well placed to benefit from POG’s rises in the future and the stock is long overdue a return to test 40p levels. AMER has struggled with lower production and delays on exploration plans. The latter should be finally kicking off in July (H2) which should place a rocket under the share price upon any good news. Trading and volumes of late have been higher than usual on AMER which could suggest that the long term large HNWI seller may be nearing an end.
Heads up stock picks PDL, OPHR and MATD are doing ok with MATD having just raised £13.7m in a placing. The first of 6 high impact exploration wells should spud in July which has been a long time coming. Exciting times ahead for MATD holders.
Another week passes and another UK retailer goes down. Poundworld has gone from selling products for £1 to ironically being sold lock, stock and barrel for £1. If the high street was a cliff, most retailers would be on the verge of going over it. Its an ever eroding cliff face. The sea of change comes in the form of a global digital tidal wave. It’s been on the cards for a few years now. The sad thing is, it probably won’t be too long before the ‘digital’ becomes the ‘bricks and mortar’ as branded Amazon stores start appearing in the high street. Stores which you can ‘instantly’ purchase what you require rather than waiting for 1 day delivery or a drone to drop your purchase off. That’s to come later. I have no issue with digital retail commerce, it brings with it many benefits. However, I do have a major issue with the likes of Amazon, Apple and Google paying minimal tax in the regions they trade in. Yes they generate some UK jobs but those jobs are not replacing the many UK retail job losses. In terms of taxes – it’s a massive issue that needs addressing. Trump and co are protecting American interests across the globe and it’s about time the EU and UK started slapping some firm ‘digital’ tax laws on these big American companies.
Last week saw the long and established London Stock Market wobble. Embarrassing for the LSE. More blushes were felt when news materialised that the FCA/LSE will press ahead with a controversial new premium listing to facilitate the Saudi Aramco IPO deal. Shameful stuff and just shows how greed drives mentality at the expense of credibility. Years of tradition and rules can be changed in a whisker if it means a decent pay day. Integrity ‘shot’ on that one but assuming all involved get a sniff of that $1 trillion due to hit the market it will make for a good bonus year. That said, it would not surprise me one bit if the vampire squid (GS) took the bulk of the order book as Trump and co has been cosying up with the Saudi’s of late. Certainly going to be an interesting IPO when it finally hits the market… next year?
Week 23 Review
Much of the same and a little like watching paint dry of late. I’m afraid the impending summer period is not likely to improve ‘market activity’ so best enjoy the sunshine and the footy over the coming weeks. The DailyMail continues to head the pack but TheShareHub has plenty in reserve for a strong H2. Top picks like AMER, HUM, CERP, PMO, TLW and so on should all do well as the drill bit turns and PoO continues to show strength. M&A is still missing in action but it might not be too long before the big super majors start picking off the little guys with large reserves. Ophir Energy looks primed like a T-bone on a sunny day. Keep you eyes on that one. Shell lost out on Cove Energy a while back and may well fancy taking OPHR out simply to gain a greater control/equity stake in Tanzanian assets. Due to being heavily oversold after the Fortuna Schumberger debacle, Ophir Energy is looking cheap especially based on potential production of 25kboepd post acquisition terms. Therefore, TheShareHub is initiating coverage on OPHR at 50p with a target on takeover being £1+. This is the 3rd heads up stock this year following MATD and PDL. There will be 5 heads up picks in 2018 with the latter 2 arriving exclusively in the email box of all ShareHub Subscribers.
Another bonkers week out there in the floating bubble we call the world. From Sleeping tablets that induce racist rants to butter fingered goal keepers and last but not least…Journo’s faking news. Not sure the last one is anything new but it certainly had Putin and his buddies jumping for joy. Off the hook on that one it would appear unless of course he had a twin brother…
Last week apparently saw the weight of Oil shorts vs longs via hedge funds swing in favour of shorts for the first time in 3 months. Hence, you should expect the usual plethora of negative news stories to be circulating as the Hedge funds seek to maximise their positions and play with your mind. The truth is… with Oil near 3 to 4 year highs, you really would expect the US rig count to be higher. Yes it is rising, but it’s a country mile away from where it was when Oil was last trading in the $80’s. OPEC are set to meet up on June 22nd and if any past meetings are to go by, the headline news should be known a day or so before the official release. Calls to raise output are being confused with a yearly increase in supplies. The reality is, OPEC are already millions of barrels down due to issues in Libya, Venezuela and soon to be ‘IRAN’. Increasing output should not be seen as a negative – quite the opposite. This is not about flooding the market, but more about avoiding $100pb+. The Saudi’s have said for sometime now that they are keen on $75pb to $80pb ahead of their world first Saudi Aramco IPO set for next year. Keeping the range steady is an opportunity for OPEC to test the market out. Unfortunately the casino style market we trade and invest in is more about making money from wild swings than steady ships. The idea that Oil could trade in a tight range for the next 2 years+ would be enough to put some hedge funds out of business. Too much fun has been had over the last 4 years (or ten) and it would be healthy for all involved (US Oil Industry included) if some kind of formal agreement to support oil pricing at a set range could be drawn up. That would mean some kind of cap on US production too which might raise some eyebrows. But the fact is, it might be better making money from a steady $70pb to $80pb range for 5 years+ than a range of $80pb one year and $50pb the next. US shale ironically ‘needs’ a steady market to ensure investment returns. Without the latter, it’s possible that US production could begin to decrease in the future even with PoO in the $70’s. The fight for market share is decades long and I doubt it will disappear anytime soon but playing the ‘long’ game might help all involved plan for the future, a future which at present looks heavily under supplied due to lack of new projects and developments. Whilst PoO will consolidate before and after June 22nd, the bearish case for Oil has all but gone. It’s now more about what price is best for a barrel…over the next 18months… $75pb or $85pb (Brent). Catalysts such as Iranian sanctions should keep the PoO shorts tight.
Week 22 Review:
The Daily Mail top picks open up a small lead which is an impressive turnaround after being 10% down earlier in the year. That’s almost a 20% swing. The Guardian picks demonstrate a more familiar flat and boring bluechip market symptomatic of being near all time highs. The slow summer period is already upon us and news is light. TheShareHub top ten look solid but a few picks are still short of where they ought to be. Big news should be coming from CERP and HUM – both should confirm cash flow positive positions are increasing via greater production volumes. Outside the top ten picks TheShareHub’s 2 x heads up picks for the year are PDL and MATD. The delayed/disputed diamond sale has hit Petra Diamonds hard and last week saw the launch of a discounted rights issue. In theory, once the RI has been done, the company should be in good shape again. It might take sometime for the dust to settle but I would expect to see PDL back above 90p before year end. And finally, MATD… the minnow on the verge of super major sized exploration is just weeks away now from first spud of a whopping 4 x exploration well programme. The market should wake up a little once a firm spud date in July has been confirmed. At 11.5p, it has the potential to double in price and that’s before any discovery is made. Risks remain but with 4 drills in total, surely they can bag a big one. Don’t rule out a late farm in deal either… the recent Results RNS seemed to hint that partners are still being sought even though the company is fully funded. Interesting.