Question 1: I am interested in your thoughts on the oil and gas sector over the next 12-24 months. There has clearly been a significant rebound and was wondering on the potential upside with all the economic stimulus coming through. To that end, interested in your view on Santos (STO) and their pipeline of projects coming.
Answer: I am a little more cautious about the energy and gas sector. I note the tailwind from stronger global growth. However, OPEC+ has been pretty good at “managing” production to meet demand, and there is still considerable production capacity. I am not convinced that the oil price is going to get sustainably over US$60 pb. The prospects for the LNG price are probably better. Of the majors, I prefer Santos (STO) and Woodside (WPL). Under CEO Kevin Gallagher, Santos looks very focussed on its growth projects.
As for the major broker analysts, they largely agree with my thoughts (judging by implied share price upside). Here are the current target prices and implied upsides (source: FN Arena):
Question 2: Let’s talk about Bitcoin, which is not going away. Microsoft has allowed use since 2013 for its gaming platform, and Tesla and many smaller companies are coming onboard. The talk from the older business gurus like Buffet and Munger is they hate it, but then they also were very late to invest in companies they did not understand, such as Amazon. It has been the best investment for the last 10 years. Should we disregard?
Answer: I don’t think Bitcoin is going away. However, It is also a speculative bubble. I think Central Banks will regulate it and other cryptocurrencies by promoting a government sponsored cryptocurrency alternative. You can read my article here.
Question 3: I hold Genex Power (GNX) shares. They are raising capital to build the Kidston Pumped Storage Hydro Project through a non-renounceable entitlement offer for additional shares (11 for 20) at $0.20 per share. The current share price on the ASX is the same. Why the same price, and your thoughts on this offer
Answer: Because the stock on the ASX is trading at the same price ($0.20) as the offer price, it tells you that there is a fair bit of indigestion with the stock. Perhaps the recent institutional equity raising was not quite as well supported as the company many have liked.
The market is sounding a warning. If you do want to invest, you will need to hurry – the retail offer closes this Friday.
Question 4: Is Nuix (NXL) a buy yet?
Answer: I really like the look of Nuix (NXL) but I am very wary of companies that have spectacularly successful IPOs (from an IPO price of $5.31 it rose rapidly to $11.85) and then bombs badly at the first real news (an update on how they are tracking against their prospectus forecast). It is now $5.07. The track record of companies in this category is very poor – the market doesn’t forgive readily and, usually, the next several months on the ASX is really hard. I like the company and see all the positives about its business and its customers. But it is still a Macquarie sell-down. It is on my watchlist, and while around $5 looks tempting, my sense is that you can be a little bit patient.
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 regard to your circumstances.
