Investment manager, Alto Capital<\/em><\/p>\n In over 25 years advising on resources stocks, Locantro has never seen valuations as low as they are right now.<\/p>\n First, let\u2019s get lithium out of the room. As far as Locantro is concerned, that stock bubble has \u2018well and truly burst\u2019.<\/p>\n \u201cI think a lot of the lithium companies now coming out with announcements, it\u2019s like turning up to a p..s up at 3am and you get offered a vegan pizza, no one wants it.\u201d<\/p>\n Lithium concentrate prices have fallen from over US$8000\/t early last year to US$850\/t today at spot rates.<\/p>\n Gold, however\u2026<\/p>\n \u201cWe have a lot of gold companies with gold in the ground,\u201d Locantro said.<\/p>\n \u201cNormally, enterprise values were $30-40 an ounce, sometimes now they\u2019re $10-20. The gold stocks are dirt cheap.\u201d<\/p>\n Gold stocks like Alto Metals (ASX:AME \u2013 28c, $20m MC)<\/a><\/strong>, a WA gold explorer with a 1.05Moz bounty around the historic but underexplored gold field of Sandstone.<\/p>\n \u201cFor a lot of the major companies going out and buying ounces is a lot cheaper than drilling and going through the process of putting something into production,\u201d Locantro says.<\/p>\n \u201cSo I think we\u2019re going to see another surge in M&A, especially in the junior gold sector. Alto Metals looks one to look at.\u201d<\/p>\n \u201cI don\u2019t think the market\u2019s appreciating the gold resources that (MD) Matt Bowles and the team are building.\u201d<\/p>\n Locantro also notes Aurumin (ASX:AUN) as \u201cactive in the Sandstone region\u201d, and holds in interest in Westgold (ASX:WGX).<\/p>\n Another commodity Locantro\u2019s watching is copper.<\/p>\n \u201cFor all the hype around copper, the Australian copper juniors just see no love, share prices have capitulated,\u201d he said.<\/p>\n One he believes has been sold off harshly \u2013 Stavely Minerals (ASX:SVY \u2013 3c, $11.8m MC)<\/a><\/strong>.<\/p>\n Stavely made the Cayley Lode discovery in 2019, Locantro notes, which saw shares run to \u201cabout $1.30\u201d.<\/p>\n \u201cNow they\u2019re trading at 3.3-3.4 cents and \u2026 here is a chance for (MD) Chris Cairns maybe to come out and say well, \u2018wait a minute, we\u2019re still focused on the Cayley Lode and those large copper projects\u2019.<\/p>\n \u201cIt doesn\u2019t matter what commodity you find, if you make a big discovery, the market will rerate you.\u201d PM and founder, Fairmont Equities<\/em><\/p>\n It\u2019s a cyclical world on the bourse, according to Gable.<\/p>\n \u201cWhat we want to do is parse out the sectors which do well when the economy is doing well. And highlight a few plum examples.\u201d<\/p>\n This is a story less about exactly when the economic tide is going to turn\u2026 and more about what kind of raft you should be making.<\/p>\n Materials Sector \u2013 Champion Iron (ASX:CIA \u2013 $8, $4.5bn MC)<\/a>:<\/strong> \u201cAs manufacturing beefs up, so does the need for supplies of raw materials to produce their products. Construction also increases when the economy is strong,\u201d Gable says.<\/p>\n \u201cCIA certainly flies under the radar compared to BHP (ASX:BHP), Fortescue (ASX:FMG) and Rio Tinto (ASX:RIO). But this little known iron ore miner is developing a large resource in Canada.<\/p>\n \u201cRecent production has now hit a record with plenty more to come online over the next few years.<\/p>\n \u201cDespite the share price sitting near all time highs, the valuation is still more attractive than the larger iron ore producers.\u201d<\/p>\n Industrials Sector \u2013 NRW Holdings (ASX:NWH \u2013 $2.83, $1.28bn MC):<\/strong><\/a> Industrials \u201cusually have fixed costs which they pay in all economic conditions\u201d.<\/p>\n \u201cSo, when the economy is good, their margins increase, and their revenues head higher. Companies are also more willing to spend more money on equipment upgrades and shipping when business is going well.\u201d<\/p>\n Gable says keep an eye out for stocks focused on transportation, capital goods and commercial and professional services.<\/p>\n NWH provides diversified contract services to the resources and infrastructure sector.<\/p>\n \u201cAs spending in resources and infrastructure picks up, NWH should pick up more contracts and this is exactly what has been happening in the past several months.<\/p>\n \u201cRecent guidance on earnings and their tender pipeline was upgraded by the company.\u201d<\/p>\n Consumer Discretionary \u2013 Accent Group (ASX:AX1 \u2013 $2.34, $1.32bn MC):<\/strong><\/a> \u201cA strong economy can lead to stronger consumer confidence. This can therefore lead to increased buying in the consumer discretionary sector.<\/p>\n Accent Group is the business behind footwear brands such as The Athlete\u2019s Foot and Skechers.<\/p>\n It\u2019s coming off an impressive FY23 where Earnings Before Interest and Tax surged 122.9% and Net Profit After Tax jumped 181.8%.<\/p>\n Gable says AX1\u2019s gross margin percentage improvement of 100 basis points (to 55.2%) last year was the achievement which impressed most analysts.<\/p>\n But so far in FY24, the Accent share price has been maudlin, due to flatter sales and rising costs.<\/p>\n Gable describes that reaction as \u201coverly negative\u201d and \u201cundervalued compared to the larger retailers \u2026 it is easily positioned to benefit from a recovery in consumer spending.\u201d <\/span><\/p>\n The post SUNDAY ROAST: The stocks that lit a fire under our experts this week<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"
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\n<\/strong><\/p>\nMichael Gable<\/h2>\n
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\nThe views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.<\/em><\/p>\n