{"id":5158,"date":"2024-01-31T18:10:56","date_gmt":"2024-01-31T18:10:56","guid":{"rendered":"https:\/\/economicherald.net\/?p=5158"},"modified":"2024-01-31T18:10:56","modified_gmt":"2024-01-31T18:10:56","slug":"moneytalks-why-this-portfolio-manager-is-bullish-on-the-most-shorted-lithium-stock-on-the-asx","status":"publish","type":"post","link":"https:\/\/economicherald.net\/?p=5158","title":{"rendered":"MoneyTalks: Why this portfolio manager is bullish on the most shorted lithium stock on the ASX"},"content":{"rendered":"

MoneyTalks is Stockhead\u2019s regular recap of the ASX stocks, sectors and trends that fund managers and analysts are looking at right now.<\/p>\n

Today we hear from Australian Ethical portfolio manager Mark Williams<\/a>. <\/em><\/p>\n

\u00a0<\/p>\n

From an analyst sector perspective, Williams covers the telecommunications sector as well as several other sectors across industrials, like lithium.<\/p>\n

He believes it\u2019s going to be another year of uncertainty on the markets, but with the Fed Reserve indicating the pathway downwards for interest rates towards the end of 2023, growth sectors like healthcare and technology should see some positivity.<\/p>\n

\u201cIt will be interesting to see if that plays out or not and if it does, there\u2019s potential for growth sectors of the market \u2013 which have seen challenging times in the last year or two \u2013 to outperform again,\u201d he says.<\/p>\n

\u201cOn the resources front, lithium is an interesting one \u2013 in the short term, the spot price very much dictates sentiment but we\u2019re pretty confident about the long-term demand thematic around the lithium batteries needed to power growth in EVs and general energy storage,\u201d he says.<\/p>\n

\u00a0<\/p>\n

Top ASX picks <\/strong><\/h2>\n

Pilbara Minerals (ASX:PLS) <\/strong><\/a><\/h2>\n

Williams approaches the lithium market and opportunities in the sector by focusing on companies that are in production.<\/p>\n

\u201cIt\u2019s an important aspect to consider if you think about the type of cycle markets are in at the moment,\u201d he says.<\/p>\n

\u201cPilbara Minerals have been in production for a couple of years, and they\u2019ve generated significant free cash flow, which means their balance sheet is strong as opposed to the likes of Liontown, for example, who are really struggling.<\/p>\n

\u201cWhen you\u2019ve got lithium markets and spot prices failing dramatically, those that are either not quite in production or just getting to that point find themselves in a difficult situation,\u201d he says.<\/p>\n

NOW READ: Shorter\u2019s fave Pilbara Minerals could dump dividend but shares optimism for long term lithium outlook<\/a><\/strong><\/p>\n

\u00a0<\/p>\n

While their cash has come down, they\u2019re still sitting with $2.1b on the balance sheet which gives them a lot of flexibility to manage this type of downturn, William adds.<\/p>\n

\u201cThis is exactly what we saw in the last downturn in 2019 heading into early 2020 \u2013 just having that balance enabled them to get through and acquire the Altura business next door to them, which is now helping them build scale into the business,\u201d he says.<\/p>\n

\u201cA strong balance sheet is key, and they\u2019ve certainly got one of the strongest balance sheets in the market, their latest quarterly should remind people of those types of attributes.<\/p>\n

\u201cI think they\u2019ve been prudent to talk about the dividend, but it looks like they\u2019ll probably withhold the dividends for the first half just to preserve cash to make sure their balance sheet is strong, which I think is a very sensible thing to be doing in this type of market.\u201d<\/p>\n

\u00a0<\/p>\n

Resmed (ASX:RMD)<\/strong><\/a><\/h2>\n

Another stock at the larger end of town that Australian Ethical has invested in is ResMed within the healthcare sector.<\/p>\n

\u201cTowards the end of last year as these obesity products started to come into the consciousness of not just the public but investors and equity markets, we had the view that the potential outcome for Resmed could potentially be significantly negative, given there are sleep apnoea products selling in the market,\u201d he says.<\/p>\n

\u201cThe theory with obesity drugs is that if they are wildly successful and obesity levels drop broadly for the population, then there\u2019ll be less sleep apnoea conditions in the market because sleep apnoea is quite often triggered by overweight or obesity.<\/p>\n

\u201cResmed\u2019s share price ended up being sold down quite aggressively but we\u2019ve concluded that the impact was overstated and so we saw it as a good opportunity to get an exposure to it.\u201d<\/p>\n

Williams reckons there\u2019s opportunity for a rebound as the market comes to appreciate that in the shorter term, these drugs aren\u2019t having any impact on Resmed\u2019s business because a lot of these obesity drugs are still in trial.<\/p>\n

\u00a0<\/p>\n

Gentrack (ASX:GTK) <\/strong><\/a><\/h2>\n

Gentrack is a $600m small cap utility billing software company providing processes for energy companies like Energy Australia.<\/p>\n

\u201cWe really like this stock, we\u2019ve been in Gentrack for a couple of years, and they\u2019ve got a new management team that has shaken up the organisation and have driven some pretty significant change through the business to the point where it\u2019s now growing very strongly,\u201d Williams says.<\/p>\n

\u201cThey\u2019ve got some good growth prospects over the next couple of years, they\u2019ve won some big customers and done some pretty major contracts in the last little while, the last one being with Mercury in New Zealand.\u201d<\/p>\n

\u00a0<\/p>\n

PLS, RMD, GTK share prices today:<\/h2>\n\n

\ufeff<\/span><\/span><\/span>
\n<\/span><\/p>\n

The post MoneyTalks: Why this portfolio manager is bullish on the most shorted lithium stock on the ASX<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"

MoneyTalks is Stockhead\u2019s regular recap of the ASX stocks, sectors and trends that fund managers and analysts are looking at right now. 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