Today’s Profit Watch begins with a bold claim. Don’t fear the recent market action: embrace it!
You have to see the benefit in times likes these. Yes I know. It would be lovely if stocks did nothing but go up.
Or would it?
After all, if stocks only went up, how would you get a chance to buy the ones you don’t own at a good price?
There’s another reason when we see a wave of selling. You get a cracking look at which stocks buck the market trend…and go up!
I saw two notable stocks in the new highs list yesterday. They were Galaxy Resources Ltd [ASX:GXY] and Mincor Resources NL [ASX:MIN].
Why is this notable?
One is a play on lithium and the other is nickel!
Hello! Both are key in batteries and renewable energy.
Perhaps the more interesting one is Galaxy Resources. I say that only because lithium pricing is weak now compared to nickel.
This is to say; it’s more of a surprise to see GXY up there.
Or is it?
It seems to me that the market is now pricing in the bottom for the lithium market, and the race is on to acquire those with the best assets.
We’ve got some other clues from this.
The Financial Times quoted the European Industry Commissioner saying this on 31 August:
‘The era of a conciliatory or naïve Europe that relies on others to look after its interests is over.’
The EU is short on critical minerals to make batteries and renewable energy equipment — and they know it.
They now have considerable urgency to do something about it.
What was the big commodity on the EU critical resource list?
So now we have the ‘big three’: the US, China and the EU all hunting around for natural resource assets…with a dose of nationalism thrown in.
For example, there is a stock called Piedmont Lithium Ltd [ASX:PLL]. You might like to follow that one.
I’m not saying it’s a buy. But I can tell you it’s a lithium developer in North Carolina.
You would think the fact that it’s in the US it would appeal to US car manufacturers and investors.
I remember way back in 2017 I saw their CEO present on their plans. He was a former investment banker.
My impression was he had a good chunk of ‘get up and go’ about him.
Now, it takes a long time to get a mine up and running: often as much as 10 years. It’s a slow process. But now’s the time to do some homework on projects and stocks like this.
The old quote applies here: ‘The harder you work, the luckier you get.’
Why am I thinking of this?
As we’ve talked about this week, market volatility can hand you lots of opportunities.
Let me tell you about a big one. I was telling this to my paid subscribers the other day.
In December 2018 I recommended a stock called Chalice Gold Mines Ltd [ASX:CHN].
It’s a developer/explorer with several projects on the go.
Gold in general was rallying in early 2019 and Chalice shot up about 40% in a few months.
I told my subscribers at the time to bank the gain because it came essentially risk free (ie: without waiting on specific drilling results).
But I said at the time too that they could hang on to the stock if they wanted to ride along with the projects.
My original recommendation was based off Chalice’s Victorian gold lease.
I didn’t pay much attention to its other projects.
What happened next in our story?
It crashed the market. And of course, like all stocks, Chalice sold off.
But on 16 March it went into a trading halt.
Think about that date for a moment. It was the near-bottom of the market and the bleakest possible outlook in terms of the economy.
Chalice hit a major strike out in Western Australia…and proceeded to soar 800%.
Point being: When the panic and selling was on, you could have made a rational choice to acquire chalice. What mattered was what was in its leases.
Well why didn’t I?
I was too busy speculating in the options market at the time! It didn’t cross my mind. I hadn’t really kept up with what they were doing since I recommended selling.
That’s why it’s important to try and think ahead. Keep a list of stocks that you want to own…and why…so if the markets throw up a total curveball as they did in March…you’re ready to pounce.
Lithium may look a little tepid right now relative to, say, gold. But who knows what’s coming in 2021 or 2022?
Editor, Profit Watch
PS: Profit Watch is a fantastic place to start your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here.