How to Energise Your Portfolio in 2023
This week, with electricity in the air from the World Cup, what’s going to power it? We review the great returns that investing in the diverse energy sector has provided investors, as Rich delves into the high interest rate environment we’ve been forecasting and which we find ourselves in. ¡Viva Argentina!
Learn more about Small Caps Investing and why we picked these ASX Small Cap gems and their outstanding performance.
Well Positioned Stocks
Electricity requires energy which is facing increasing demand, leveraging certain stocks to explode. We see this in some of our stars of 2022, returning 106% a year for the past three years: Pilbara Minerals (PLS), Karoon Energy (KAR) and Paladin Energy (PDN).
Pilbara of course is in lithium production, Karoon is a small cap oil producer and Paladin is the ASX’s flagship uranium stock and soon to be producer.
Investing is indeed about the future, which is one of the reasons why we’ve done well this year in some of our calls, particularly on the commodities front.
What is the Corporate Perspective?
Recently, I’ve been talking to a number of fund managers lately for our 2023 Round Table and they profess not to invest much in mining because they don’t have expertise there. Well, luckily, at Under the Radar Report, we do! Electric cars aren’t made out of thin air and in order to position your portfolio to take advantage of where demand is, buying certain commodity producers is the way to go. This is what BHP is doing. This is what its spin off South32 is doing. Read about it in this week’s Blue Chip.
But if you want bigger leverage, you need to own more focused producers, like the ones I mentioned above. In this week's report (Small Caps Issue 528) we include three energy stocks that are slightly earlier in the curve than those three. And next week we will be covering three more.
Find out which stocks will energise your porfolio in 2023
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When you listen to the big regulators in energy you know that the transition to renewables isn’t simple. There isn’t just one solution. There is going to be a mix of assets. This is why we include a lithium developer, a gas producer and a uranium developer. You need diversity.
Getting back to the fund managers
It’s clear that they haven’t had an easy time of it in 2022. What is also clear is that they’re on the hunt for stocks.
The bigger picture in the markets was highlighted in the Economist’s leader this week titled “The new rules” where they’re saying that the era of higher interest rates for longer is upon us. This has big implications for investors, but what they’re basically saying is that the savings glut talked about back in 2005 by then Fed Reserve Governor Ben Bernanke, is disappearing.
To invest successfully you need to be patient. The value philosophy is the key to making money in the long-term, which is why we embrace it.
More to the point, the investment pain means that the expected returns of stocks has increased. Before, that future return was capitalised in asset prices. Now it’s not so much the case.
What does this mean for Investors?
Don’t get me wrong, it will continue to be a bumpy ride. But it’s about picking those stocks that can deliver value faster. We continue to see stocks in small caps and in blue chips that are worth investing in, which is why we are initiating coverage on more stocks now than I can remember.
Next week we have the second part on our energy series and trading tips coming at your from our portfolio managers.
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