Figure 1 S & P 500 vs. the Rest of the World: America First!
Source: Charlie Bilello
Equity markets are struggling again. Last week it was a hawkish Fed and this week it is a rhinocerosish Trump to blame. However, investors have been troubled since the end of January as they have desperately sought to maintain the momentum since 2009 (with only a few rude interruptions, especially in 2015). As always it is US investors and US markets that set the pace and they now face a difficult decision as to whether to keeping relying on the Big Tech companies, now expanded and lumped together as FAAMNGs plus BATs (Facebook, Apple, Amazon, Microsoft, Netflix, Google plus Baidu, Alibaba and Tencent). For some time now Daniel Stewart, although not enforcing a strict house view, has decided against such reliance. This, however, is not the same thing as being a seller of these hugely impressive companies. Instead, we have concentrated on investments that are both different and complementary to each other and to Big Tech. Our knowledge of the small cap markets means we remain attracted to IPOs (Items 2 and 6) but we also like Pre-IPOs and even post IPOs (Items 4 and 5). Through our partnership with Chris Bailey in the Dynamic Opportunities Fund we have developed a particular angle in Big Caps, which we call Anomaly Investing (Item 3) and now we are looking increasingly at very short-term trading products. All these may well come into their own if Mr Trump and his mercantilist trade team really want to reorder the global economy and international trade in America’s favour. The US is, of course, the only national economy sufficiently large and self-contained to contemplate such a convulsion. So far, the main casualties have been Emerging Markets equities, bonds and currencies and now European (especially German) equities and currencies (Item 7) are being drawn in. However, it is US Multinationals that have gained the most from globalisation and their shares have powered ahead vs. the rest (Figure 1) and now, having reveled in Mr Trump’s tax cuts, they face a twin threat from his trade policies and Fed tightening. No wonder then that markets are faltering.
firstname.lastname@example.org Chief Economist
Figure 2Independent Oil & Gas PLC: pigging in the North Sea
Source: Google Stock Images
Independent Oil & Gas (IOG) is an AIM listed, UK-based development and production company with established interest in four UK North Sea licenses with huge gas reserves. Two weeks ago the Company announced that its pigging programme had provided new information for the recommissioning of the Thames pipeline. Three pipeline sections were cut 60 kilometres offshore, which indicated that the pipeline is in good condition and its integrity has been confirmed through pressure tests. Although the gauge pigging runs were successful they were followed by an intelligent pigging run that failed to gather enough data due to “technical malfunction with the pig”. Chief Executive Officer, Andrew Hockey reported “While this gives us even greater assurance on the pipeline’s fitness for purpose, we do still require the intelligent pigging data acquisition to be fully and properly completed. We are now fast-tracking plans to have this done as soon as possible,”. This news was good enough to send the share price soaring by around 30%. COO Mark Hughes has purchased 178,000 shares at 22.33p, Swiss fund Burggraben Holding AG have upped their stake in the company from 5.1% to 10% and senior executive Peter Young has built a stake of 7.8%. This is alongside the backing of London Oil & Gas, who have committed a total of £25m approx. of loans to IOG. The Market Capitalisation is £33m with the share price now standing at 26.5p. The planned second intelligent pigging run is expected to have an impact on the schedule of the project and in due course on the share price.
Steve.email@example.com Investment Hub
Figure 3 Harvest Minerals Limited: Natural, ethical and cash generating.
Source: Google Stock Images
Harvest Minerals (HMI.AIM) takes naturally occurring volcanic material found very near the surface of un-forested land in Brazil, crushes it, then hey-presto, you’ve got the product. The product KPFertil is used to provide local farmers and large multinationals with very high quality potassium-based fertiliser. The farmers that have become customers have claimed higher yields on their crops as well as a more nutritious final product. The fertiliser also targets a wider more urgent ecological issue. Brazil’s massive yearly rainfall washes out the potassium from traditional fertilizers, thereby creating a need for continual replenishment. KPFertil is clay based – meaning that it ‘sticks’ within the weathered land- and is absorbed by the surrounding soil rather than being washed away. Brazil imported $9bn worth of fertilizer last year and the government is hugely supportive of domesticising production, which should certainly benefit Harvest. The current production capacity is up to 320,000 tonnes per annum and the recently-won first three contracts totalling 110,000 tonnes leave plenty of scope for more sales that would not require additional capex to meet. The basic economics are $7.5 p/t to produce vs. the $60 p/t sale price. The recent placing was done to ensure there was enough capital to keep it running until cash arrives from their current order book, as payment only comes 60 days post-delivery. Executive Chairman Brian McMaster personally invested £800K in what is likely to be the last funding round. The company expects momentum for orders to roar ahead over the next year. Another plant is already being developed (a further 320,000 tonnes in capacity per year) and there exists 3 other untouched volcanic resources that are yet to be exploited. TheMarket Cap is £37m. Disclosure: I hold shares in this company.
Dhivyan Kandiah Investment Hub
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By Alastair Winter
Cheif Economist at Daniel Stewart