This week has been one of the most intense this year. Q1 earnings are always busy, but this week - and next, are simply exhausting with dozens of titans across banking and big tech reporting in a squeezed frenzy of activity.
Standard caveat - this is not financial advice and I’m already on the fourth glass of whisky.
I often think that the focus on quarterly reporting is not good for larger companies - who must always seek to satisfy the short-term trader with his eye on the bottom line instead of the long term investor looking for the next big thing.
Nowhere is this more apparent than in mining and biotech. The supply gaps for copper, lithium, graphite et al will be opening up into gaping chasms over the next decade - and literally everyone agrees. This is a very rare thing. Try to find an analyst who thinks there won’t be a copper shortage by 2030 - you can’t.
The problem is - and despite the soundbites coming from FTSE 100 miners - exploring and opening new mines is expensive and time-consuming. A new lithium mine usually takes about a decade to go from initial exploration to producing.
And if a company like Rio Tinto, Glencore, or Antofagasta spend significant capex on opening new mines to replace faltering legacy production, they will have to cut their dividends and investors will desert.
Ironically, this is what is giving China the lead in African mining operations. Instead of an investor base looking at Q2 2023, they’re looking for FY 2030.
Biotechs are the same - developing a new treatment is incredibly expensive and usually takes years. 90% of Phase 1 clinical trial candidates fail, and the 10% that succeed are often not the money-spinners that investors think they are.
Just remember that no RNS doesn’t mean bad news. It often means that management is actually working on the ground to deliver.
Top AIM picks
You can see this all playing out across my top four picks for 2023 - and yes, these remain my top picks.
#PREM - we’re now paying some interest to Canmax. This is pennies in the scheme of things and really doesn’t matter. Production and first sales will come. They didn’t build a plant for nothing, a billionaire investor didn’t visit the site for no reason, and they didn’t invite PR companies out to talk about the weather.
#HARL - Islandmagee (worth up to £100 million) JR Hearing is next week and a positive outcome could finally see the re-rate investors are looking for. This company is sharing a £1.6 billion defence sector contract and has a market cap of £30 million.
#BOIL - Chuditch has the competent person’s report and will eventually sell. Those thinking of getting out - and everyone has their own risk tolerance - might want to check out what happened in mid-October last year. The rocket will launch, and those without tickets will miss out.
#AVCT - human dosing of AVA6000 in the states and a decent cash runway. I recently called Avacta ‘risky as fuck’ - and I stand by this. If the flagship fails at any point, despite how very promising it is, the shares are going to collapse. And despite positive PR, high quality science, and big names involved, we are still in phase 1.
Of course, this is just one person’s opinion - but most of those endlessly pushing the company are also diversified elsewhere. I have covered Avacta for a long time, have been singing its praises, and consider it an exceptional opportunity. But it is still high-risk, high-reward.
I’m also starting to invest heavily in #FCM, #POW, #TYM, and #ARCM. These are all in the wait and see phase - but no news means lower share prices and decent entry points.
I am also a long-term investor in #KOD - though I consider this share fundamentally de-risked so it’s just not in the same category any more. Funding secured, SP probably worth 95p at ‘fair’ value right now. Of course, this will rapidly change as they start to develop Bougouni and the underappreciated gold assets on the books.
Graphite and REEs
Final note - I covered my top graphite plays a few months ago - including #MARU, #TGR, #BRES, and #GROC.
Marula is outperforming, though this was an easy buy in November last year. The AIM listing may see a rise to 20p by July.
Tirupati is volatile, but flat for me overall. Will be increasing my holding as the SP dips.
GreenRoc has fallen by about 25% since I invested. I’m not worried about this - MARU’s performance has more than made up for the loss, and I expect this one will take two years or so to come good.
Blencowe is doing very well, and is a sleeper hit under the radar. I’m saying this not as advice, but to the people who subscribe here - I increased my holding at the start of the month and am up 42%. Further rises will come in May. Major shareholders have increased their shareholdings, and large samples from their Orom-Cross project have been analysed in China with results due imminently.
It’s KOD 2.0 - some Chinese company will announce a funding package shortly and away we go. Again, this is high risk and not advice.
Finally, my one REE stock -#MKA. Mkango just needs to sell Songwe, and then the SP will take off. I’m actively looking for similar REE companies, but can’t find any that fit my profile - if you know any that might be worth highlighting, please send me a DM, comment on Twitter, or comment below.
Signing off as I’m fairly exhausted - you all know the game. These are ALL high risk companies. Less so if you diversify, and again perhaps less so if you’ve done the research. This isn’t a de-ramp or even a warning as I can’t tell you what to do.
It’s simply a heartfelt note that putting all your eggs in one basket means you’ll either be driving a lambo, or driving a bus. We’ve all woken up to that nightmare RNS at least once.
You can’t look for a 1000%+ rise without accepting the risk profile.
Until next time.
PS. with First Republic down for the count, I think the next financial crisis could be imminent. Binance or Coinbase may be next, but one thing’s for certain.
Investing in a US regional bank is now riskier than a FTSE AIM share.