While the ASX 200 bounces around like a yoyo, beneath the surface there is an historic meltdown occurring in many mid and small-cap stocks.
If you are caught in a few of them you know all about it.
The relentless selling has taken on a life of its own and now we are in the phase when investors are dumping stocks at any price just to end the pain.
While the ASX 200 bounces around like a yoyo, beneath the surface there is an historic meltdown occurring in many mid and small-cap stocks.
If you are caught in a few of them you know all about it.
The relentless selling has taken on a life of its own and now we are in the phase when investors are dumping stocks at any price just to end the pain.
In today’s Closing Bell video I show you a bunch of stocks that are a shadow of their former selves. Zero-carbon lithium hopeful Vulcan Energy [ASX:VUL] has fallen from $16.65 to $3.27 in two years. Synthetic graphite company Novonix [ASX:NVX] is down from $12.27 to 74 cents in that time.
It is getting to the point where astute investors should be starting to lick their lips knowing that they will be able to pick up these companies for pennies on the dollar.
The graphite and lithium stories aren’t dead. Decades of increasing demand are still coming down the pike.
Instead we are witnessing what happens when a sharp jump in interest rates from near zero levels bursts a speculative bubble.
Due to the huge and obvious opportunity related to the coming EV revolution and energy transition, speculative money flooded into those companies when money was incredibly cheap.
The valuations got to absurd levels as investors started pricing in best case scenarios.
Now that the bubble has burst there are many investors trapped in bad positions who are slowly buy surely getting shaken out of those positions.
If Novonix was overvalued at $12.00, is it now getting undervalued at 74 cents?
When the panic sets in you have to allow the selling to reach a crescendo and then wait for concrete signs of life before venturing back in.
But the carnage in many stocks has got to the point where I am now actively working up a list of companies that I think will make it through to the other side of this bear market in small and microcap stocks.
One sector that isn’t feeling the heat at the moment is uranium. I have been banging the drum on uranium for a while now and gave you hints recently that it is the area that you should be focused on looking for opportunities.
In today’s Closing Bell video, I show you a bunch of uranium stocks and an ETF that you should have on your watchlist, waiting for any signs of a correction to jump on because I think we are still in the early stages of a serious rally.
The bubble and subsequent crash in lithium and graphite hopefuls and the nascent rally in uranium stocks are all part of the immense energy transition that is taking shape over the next few decades.
Everyone knows the opportunities could be huge if you play your cards right, but as the crash in VUL and NVX shows you, it’s not as simple as jumping on the bandwagon and riding it to riches.
Instead you need to step back and look at the problem with clear eyes.
Are the carbon reduction targets that the politicians tell us we are going to reach even feasible?
Can renewables really take over the task of supplying baseload power?
If not, what sectors stand to benefit?
When will demand for future facing metals actually go through the roof? Can supply keep up with demand?
Luckily for you my colleague and mate Greg Canavan has been working away on such problems and has compiled a detailed presentation about where he sees opportunities evolving as the reality sets in that the carbon reduction emperor has no clothes.
The energy transition could be the biggest investment opportunity of the next decade so I reckon it will definitely be worth your while checking out Greg’s NOT ZERO presentation.
Until next week,
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Murray Dawes,
Editor, Money Weekend
