Question: I see your comment about “S32 simply having too much cash” and wonder if you think that means that they will return some to shareholders or make a purchase? We are well in profit on our S32 holding and I’ve been seeing a lot of commentary about them being overvalued. We are well down on our Santos holding — but there prospects going forward look good. I was thinking I would sell all our S32 holding and put some more into STO to average our price down, but now I am not sure. Can you give me your opinion please? They are both in our SMSF which is primarily in pension mode.

Answer (By Paul Rickard) South32 (S32) and Santos (STO) are very different companies with very different exposures – the former to industrial metals, the latter to oil and lng. I am not sure that they are directly comparable.

Of the two, I probably prefer Santos, but acknowledge that this is higher risk as there are still some lingering concerns about its balance sheet. S32 has run pretty hard and will generate a lot of cash – but remember, these are assets that BHP didn’t want.

With respect to the broker analysts:

• Santos – consensus target price is $3.70, about a 9.2% upside to the current price. One broker (Morgans) remains very bearish – their target is $2.28. 6 buys, 1 neutral, 1 sell
• South32 – consensus target price is $2.98, about 2.1% higher than the current price. 5 buys, 3 neutrals

Question: Lithium seems to be the new Black – with massive uptake in renewable/battery projects.

Is there already, or going to be, a rush/boom in Australia on this, or is it just ‘business as usual’/too late/not significant?

What are the options to get exposure – directly (e.g., miners and which ones have concentration) and indirectly (e.g., related activities such as drilling contractors)?

What are the risks (e.g., other countries with bigger lower cost reserves)?

Answer (by Paul Rickard): Here is a link to a story we ran on Lithium a few months back, which covers the ASX listed stocks involved in or seeking to be involved in the production of Lithium.

Because of the hype, investing in lithium stocks is speculative.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.