Early-year trading indicates market is set for an up-and-down year
Published 08-JAN-2022 11:23 A.M.
6 minute read
With much of the Australian finance world still on holiday, we were back to work this week.
Feeling refreshed, we saw some big swings in the market as it edges upwards once more.
The first few trading days of 2022 were extremely positive, reminding us of what we saw in the first week of January 2021 just before the small cap bull market in the first few months of last year...
Only to be brought back to earth later in the week after the US markets took a tumble.
This could be the new normal in 2022 - a lack of easily defined direction and increased volatility as the emotions of fear and greed battle for control of the trend.
Beneath the surface though, we’re seeing some positive signs in our portfolio as the broader index masks a lot of the action in our carefully selected small cap stocks.
Whether that’s down to individual operational factors or developments in the big macro themes they work within.
For example, one of the macro themes we’re positioned to benefit from is the batteries metals boom, along with a range of other commodities. What’s more, it’s increasingly possible that action in this space increases as commodities get used as a hedge against inflation.
But this isn’t the only macro theme we follow at Next Investors. Which is why we’re rolling out quick refreshers on our macro themes which explain the why and how of our investment methodology.
Keep an eye out over the coming weeks for a deeper dive into each of our key investment themes, including an investment memo for each stock we hold in that thematic covering what we expect them to deliver in 2022.
In the meantime here is a high level summary of our key investment themes and stocks we hold in each.
📰 This week on Next Investors
The first day of trading in the new year saw our European battery metals investment Euro Manganese (ASX:EMN) announce that the European Bank for Reconstruction and Development (EBRD) made an investment in the company to the tune of C$8.5M (~A$9.3M) via a placement at C$.4775 (A$.52) per share.
Following the placement, the EBRD will hold 4.5% of EMN shares on a fully diluted basis - and has been granted rights that allow participation in future financings to maintain its pro rata equity interest in EMN.
This deal demonstrates the partnership with EIT InnoEnergy - who helped foster the deal - is progressing. EMN signed a deal with EIT InnoEnergy in February 2021 with the aim of fast-tracking EMN’s project, assisting with the securing of offtake agreements and helping raise up to €362M to develop its project.
📰 Read the full take here: New Year, New Strategic Investor and New CEO for EMN
🗣️ Quick takes on key portfolio company events this week:
Vulcan Energy Resources (ASX:VUL)
On Tuesday VUL announced that it had been granted five new exploration licenses for geothermal energy, and lithium at its Zero-Carbon lithium project.
The licenses cover 325km2 and are considered prospective for deep geothermal and lithium brine. The newly granted tenements have now increased Vulcan’s project area by nearly 50% to over 1,000km2.
The expanded landholding provides VUL with ample opportunity to expand the resource & size of their lithium project in the future.
Next: We want to see VUL’s demonstration plant operating, the DFS complete, and a Vulcan listing on the main German bourse.
Elixir Energy (ASX:EXR)
EXR was another one of our portfolio companies that started the year off with an update on its operations.
On Tuesday EXR confirmed that the 2021 drilling program had been completed with the final 3 wells now fully completed. The program as a whole comprised 17 wells of which 65% successfully intersected coals in the CBM (Coal-bed-methane) window.
This brings to an end ~300 days of non-stop drilling in 2021 with EXR already moving onto the mandatory annual regulatory process for the 2022 exploration program. Importantly EXR confirmed that key long-lead items for the pilot production program have recently been ordered.
Next: For EXR it is all about production testing. We will monitor the project over the next 12 months and provide updates and commentary as it progresses.
Invictus Energy (ASX:IVZ)
On Wednesday IVZ confirmed that it has managed to secure the necessary casing, wellheads and ancillary long lead items for a 2 well drilling program commencing in May 2022.
In the announcement IVZ also mentioned that they were well advanced with the tendering process for the well services contract - which covers most of the drilling activities that will take place over the drilling program.
With the formal award of the contract expected shortly, long-lead items secured and the recent capital raise completed everything is shaping up nicely going into 2022.
Next: We want to see the drill-rigs commissioned and drilling commencing at the elephant scale Gas prospect in Zimbabwe.
🌎 Mainstream Media:
Stryker announces definitive agreement to acquire Vocera Communications (Global Newswire)
Battery Metals (VUL, KNI, GAL, EMN, EMH, FYI, EV1)
Electric vehicles: the carmakers wary of going ‘all in’ on batteries (Financial Times)
Green Hydrogen (PRL, EXR)
Can ‘Green Hydrogen’ Clean Up Natural Gas? (Bloomberg)
Iron Ore (PFE, IRD)
How American stocks could continue to climb (Economist)
Have a great weekend,
General Information Only
S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
Conflicts of Interest Notice
S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.
Publication Notice and Disclaimer
The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.
Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.
This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.