Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Five ASX companies set to capitalise on ‘disorder’
Boutique Melbourne-based manager Datt Capital says Australian companies can steal global market share during the Ukrainian crisis, largely because Russia’s endowment of natural resource riches is very similar to Australia.
Emanuel Datt, chief investment officer, says, “The Russian output of key commodities as a portion of global production is significant. The production figures include steel at 10% of global production, aluminium (6%), coal (18%), wheat (15%), natural gas (17%) and crude oil (12%).”
These bulk commodities represent the building blocks of society, however, the sanctions applied on Russia prevent much of these commodities from being exported. And, in some cases, Europe cannot find substitutes for certain Russian exports such as Russian gas.
“A large part of this is because Russia provides around 40% of the natural gas, 30% of the oil consumed in the EU as well as being a significant coal exporter. These energy commodities are critical to the EU’s industrial and agricultural production – especially Germany with its significant manufacturing base,” says Datt.
This brings up some interesting opportunities for Australian investors with a range of potential investments that may benefit from the present and medium-term market dynamic.
Datt says, “the following ASX-listed companies are well-positioned to capitalise from the current disorder in world markets, all of which appear to be valued extraordinarily cheaply despite their strategic and profitable businesses.” He notes the following:
- Whitehaven Coal Ltd (ASX:WHC): an Australian thermal coal producer that exports its high-quality products primarily to Japanese and Korean customers.
- New Hope Corporation Limited: (ASX:NHC) produces thermal from its majority-owned Bengalla mine located in NSW. The company has one of the highest franking credit balances of any company on the ASX.
- South 32 Ltd (ASX:S32): a diversified miner that was demerged from BHP in 2015; holding most prominently a range of aluminium, coking coal and base metal assets.
- Bluescope Steel Limited (ASX:BSL): a diversified steel producer with major operations in the US and the ANZ region; that was demerged from BHP in 2002.
- Vulcan Steel Ltd (ASX:VSL): is a steel distribution business with operations in the ANZ region, recently listed (November 2021) on the ASX. Vulcan is experiencing excellent tailwinds from these inflationary markets.
