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Our 2022 Picks: How did we get on in June?

Our 2022 Picks: How did we get on in June?

It was another tough month for equities generally in June. Many investors are now busying themselves with a search for the turning point in the market. Our view is that there are a number of unresolved issues that need to be addressed before some modicum of confidence returns. Short term short side trading opportunities look like the order of the day (see Kingfisher below).

Key areas of concern for investors remain the impact of the ongoing war in Ukraine, and the fact that inflation still does not seem to be under control. Markets are looking for some kind of indication that central bankers can see a peak in monetary tightening, although we are not there yet. Similarly, some sectors are still in shake out mode where previously silly valuations have yet to properly resolve themselves (e.g. technology stocks). Energy is beginning to look a little overbought, and we were sorry to be forced to sell out of Seplat Energy in June.

M.P. Evans Group LON:MPE

We added M.P. Evans Group to our portfolio in June on the strength of demand in the Asian palm oil sector, especially from India. There were also signals from Indonesia that it was raising export restrictions on palm oil. We sat in on the OECD’s briefing for press on global agriculture markets, and heard from the experts that it is more trade in food commodities, not export restrictions, which is needed at a time when there is upside pressure on global food prices. We were also looking for a commodity stock that was not in the mining or the energy space, and M.P. Evans fit the bill.

Fortitude Gold (OTCQB:FTCO)

We are long term fans of the Fortitude Gold story. It already owns a producing gold mine in Nebraska and is in the process of exploring for more gold on its properties. We had the opportunity to meet CEO Jason Reid on a recent trip to London and were impressed by the yield profile for the stock and his plans for the miner. Although shares are still OTC only, Fortitude Gold is an impressively consistent dividend payer and obviously provides direct exposure to the gold price should that hike higher in the coming months. Reid reported that he has several investors that are just in the stock for the yield. Seasoned mining investors will recall Reid was the former CEO of Mexican gold miner Gold Resource Corp.

Europa Oil & Gas LON:EOG

Another energy story in the portfolio, this time a company with four oil fields in the East Midlands (UK). Europa Oil & Gas also has interests offshore Morocco via its Inezgane licence. It has no Russia exposure, which is a major selling point. Fields in the company’s portfolio are already under production and Europa is also exploring the Crosby Warren field. Sales, income and earnings were all reported up in the last set of numbers. Reported sales were GBP 2.19m compared to a year ago. Europa also significantly reported net income of GBP 0.743m against a loss of GBP 0.56m in 2021. We also noted a +377% change in EBITDA.

Kingfisher LON:KGF Short Trade

In the last day of June we added Kingfisher as a short side trade. It has been a while since we added a short to the portfolio, and really wished we were in on this one a little earlier. While some UK national newspapers – e.g. the Daily Telegraph – are arguing that Kingfisher is now a buy, hedge funds seem to feel differently. We saw some of the bigger funds increasing their position in the last week of June. We also ran the numbers through an AI engine which also confirmed the negative reading and that Kingfisher stock remains a sell. We add all our shorts into our tactical trading portfolio at the moment, but are contemplating a separate short side portfolio.

Marshall Motor Holdings Acquisition

Shares in Marshall Motor Holdings were suspended following approval of a bid to acquire the company by Constellation Automotive Group. The FCA provided its approval for the deal, and Constellation has officially taken possession. The takeover deal had run into some issues in January, but these seem to have been cleared away. The offer for MMH was at 400p per share. The Armchair Trader was originally in at 273p (a gain of 46%). Marshall Motor Holdings had more than doubled its value since its admission to the LSE in April 2015.

Sold from the portfolio in June: Interfor, Seplat Energy, ITM Power, Marshall Motor Holdings, Taylor Wimpey.

Portfolio move: Anglo American to Long Term Buy & Hold

Tactical trading portfolio

These are shorter term equity and commodity trades which we can see playing out within one to three months. We will sometimes keep these on longer if the trade is still quite range bound but we are anticipating further upside. These trades have the tightest risk parameters.

Company/Instrument Start price Current price* Percentage change
Raytheon Technologies 73.39 96.11 +31.1%
Sosander 15.80 18.50 +17.5%
Lloyds Bank 40.40 42.31 +4.7%
Glencore 272.00 445.10 +63.3%
Hugo Boss 52.00 50.36 -3.2%
BP 337.95 388.30 +14.9%
SPDR Gold Shares ETF 173.00 168.46 -2.6%
BHP 2389 2297 -3.9%
MP Evans 916 888 -3.1%
Kingfisher (Short) 244.30 244.30 0.0%

*Prices as of close of play on 30th June 2022

Longer term buy and hold portfolio

These are positions where we see a longer term growth scenario, usually in the small to mid cap space, but sometimes larger companies. We will typically be keeping these stocks on the list for at least six months and often longer. Consequently our risk tolerance is higher for these positions than for the trading list.

Company/Instrument Start price Current price* Percentage change
Remedy Entertainment 14.00 24.25 +73.2%
Harvia 8.86 27.06 +205.4%
Yellow Cake 211.50 325.0 +53.7%
MTI Wireless 47.00 63.50 +35.1%
QT Group 86.40 70.05 -18.9%
Nordnet 152.20 133.70 -12.2%
First Rand 5229 6237 +19.3%
Turkish Airlines 13.86 46.80 +237.7%
Live Nation 81.78 83.46 +2.1%
Airtel Africa 109.6 135.2 +23.4%
Riverstone Energy 566 666 +17.7%
VinaCapital Vietnam Opportunity 498 475.50 -4.5%
Kenmare Resources 503.0 432 -14.1%
Genesco 62 49.91 -19.5%
BlackRock World Mining 699 612.83 -12.3%
Anglo American 3355 2937 -12.5%

*Prices as of close of play on 30th June 2022

Venture portfolio

These are companies which we see as having long term and considerable growth prospects. Due to their size and the nature of the business they are in, we feel that our normal risk management constraints should not be applied to these stocks.

Company/Instrument Start price Current price* Percentage change
Nano One 1.13 2.49 +120.4%
Taat Global Alternatives  1.26 0.75 -40.5%
Kodiak Copper 0.24 0.98 +308.3%
Euro Manganese 0.44 0.25 -43.2%
Thunderbird Entertainment 1.05 3.65 +247.6%
Pineapple Power 3.25 4.5 +38.5%
Minnova Corp 0.35 0.04 -88.6%
Red Moon Resources 0.82 2.45 +198.8%
Cloudbreak Discovery 4.50 2.45 -45.6%
EnWave Corp 1.01 0.63 -37.6%
Net Zero Infrastructure 0.045 0.0220 -51.1% shares suspended
Electric Guitar 3.22 2.85 -11.5%
CleanTech Lithium 35.2 23.75 -32.5%
Canadian Overseas Petroleum 32.5 15.60 -52.0%
Torq Resources 0.75 0.65 -13.3%
DeepMarkit Corp 0.80 0.04 -95.0%
Network Media Group 0.10 0.07 -30%
Fortitude Gold 6.7 6.0 -10.0%
Europa Oil & Gas 0.025 0.024 -4.0%

*Prices as of close of play on 30th June 2022

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