Money Talks, is Stockhead’s regular drill down into the ASX stocks experts are looking at right now.
Today, we hear from Dylan Curtis, a senior dealer at Lazarus Capital Partners.
Curtis is a fan of “counter-cyclical stocks” – stocks that can gain even when the market is going down or volatile.
“Our strategies would be much more micro-focused while we wait for certain macro events to occur such as the [US] election,” he told Stockhead.
“Hand sanitisers, and anti-bacterial, as well as rubber gloves and face masks… they were hot there for a fleeting moment.
“But then the main thing is the accelerating shift technologically – because of the pandemic. So that’s the Internet of Things, cloud computing services as well as any form of delivery service.”
While noting tech stocks as well as gold stocks as generally holding up during COVID-19, Curtis said the tech sector was breaking down into smaller micro sectors.
He pointed to the example of Amazon (NDQ:AMZN), noting it was multi-channeled.
“They’re more than just a technology company as everyone knows. They’re in packaging, delivery, staffing and soon to be aeronautical with drone delivery as well,” Curtis said.
“So we are of the opinion there’s a further breakdown to that technology sector but generally speaking technology and gold has been quite successful.”
While Curtis was bullish about the tech and gold sectors generally he named one “big” and one “small” pick in both sectors.
Appen is one of the few stocks involved in artificial intelligence (AI) and machine learning. It provides language technology data and services that is used to create AI and machine learning products.
Appen listed five years ago at 50 cents per share and now sits over $30. But it has shed some 25 per cent of its value in three weeks since its half-yearly results.
While Curtis admits Appen’s results could have been better, he is still bullish.
“It was a soft result, I think. A lot of their revenue we found was quite clunky, it’s project-based contract work and so that contributed to the soft result,” he explained.
“But we’ve been buying it since that soft result as opinion that this a market leader and there was some sort of cyclical nature to their cash flow.”
Buddy is one of those “interesting smaller companies” Curtis is looking at.
While it has several business, their “main show” is their smart lighting business – LIFX which has been particularly successful in recent months.
“They’ve received quite some large orders in record volumes,” noted Curtis.
“What we believe I suppose is the shift to consumers. People are spending more around the houses at the moment – we’re locked in.
“Consumer discretionary is going down in certain areas but people are spending more money in their homes and this ties into that.”
While the majority of gold stocks are small cap explorers which may not production, Gold Road is one of the few that’s graduated to large cap miner status.
In the last 12 months it has gained another 26 per cent.
Curtis says it is one gold producer that has benefited from the lower AUD throughout much of 2020. But even with the AUD appreciating he sees upside in the company because it is making money from its project.
“Whilst that Aussie dollar tailwind is finished, they have interests in the Gruyere mine, they own 50 per cent that,” he said.
“And that provides them with cash flow and allows them other exploration opportunities in in the Yamarna Belt in Western Australia.”
In naming De Grey, Curtis simply said: “We’ve been incredibly impressed.”
Why? It has risen from 5 cents to more than $1.50 off the back of its Hemi gold discovery at northern Western Australia.
In fact its market cap is actually bigger than Gold Road despite only being at the exploration stage.
Curtis also noted the company soon faced a decision as to whether to go ahead with Hemi alone or partner with one of the big miners.
He also noted that De Grey’s growth has accelerated since raising $100 million just last week.
“That placement was done at $1.20, the stock opened at $1.26 after the placement was completed. Within that day it was $1.41,” he said.
“With that injection of capital in this environment you’re going to see a lot of stag traders, which is part of an event-driven strategy to be in it for the discount arbitrage.”
“Normally you don’t see this – the stock is still going up quite significantly. There’s quite large profits in a short amount of time.”
By Nick Sundich.
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