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.
Investing remains challenging in an unstable, post-covid world
After the minor shock of Omicron, the COVID-19 pandemic looks to be nearing its end for most locations. A new world order post covid is characterised by geo-political tensions, heightened inflation and rising interest rates.
Asset manager, Datt Capital, is of the view that investing will remain challenging in an unstable post-covid environment. Emanuel Datt, Chief Investment Officer at Datt Capital says, “The impact of past covid related social restrictions will weigh heavily on the future near term economic prospects of Australian corporate sector. This is largely due to the change in societal behaviour as a result of these past restrictions. We anticipate that localities with less onerous restrictions will bounce back with more vigour relative to those slower to relax condition.”
Heightened geo-political tensions such as the war in Ukraine, is bound to have a negative impact on certain commodities such as energy and nickel. “We also expect significant changes in the manufacturing of materials and services driven by supply chain issues,” says Mr.Datt. He highlights GWA Ltd is a typical case in point. Owing to the backlog cause by supply disruptions, the company chartered transport ships to pick up products from China.
Datt Capital has selected three stocks to benefit from the recent spike in energy prices owing to the Russian invasion of Ukraine and the subsequent sanctions enforced by the Western world. This caused substantial disruptions in the supply of energy an enormous uplift in demand for commodities of non-Russian origin to fill this sudden supply gap.
​Datt Capital says these circumstances have given rise to three unique opportunities for Australian focused investors to capitalise upon.
Datt Capital names Whitehaven Coal (ASX:WHC), Woodside Petroleum (ASX:WPL) and Santos (ASX:STO) as its three energy plays.
High quality coal producer, WHC, exports to Japanese and Korean customers. Russia coal imports supply an estimated 15-20% of Japanese and Korean coal demand. Consequently, WHC’s customers will likely be willing to increase purchase volumes from Whitehaven at higher prices than has been traditionally achievable. Datt says WHC achieved an average coal price of A$211 per tonne last year. With current spot prices over AUD$600 a tonne, Datt believes “Whitehaven is well equipped to capture these higher prices at greater production volumes than last quarter.”
Woodside Petroleum (ASX:WPL) – Is mainly exposed to the LNG markets, primarily exporting to Asia. Datt says, WPL’s prices for LNG and oil were USD$28/MMBtu and USD$80/bbl respectively which are substantially lower than current prices.
Santos (ASX:STO) – Production assets are located in Australia and PNG. Santos’ realised prices are US$9/MMBtu for LNG and US$76/bbl respectively.
Both oil and gas companies have a “strong opportunity to capture materially higher prices given the current market conditions. We also expect that STO will reduce its stake in certain development assets which provide the potential for future capital returns along with its regular dividend,” says Datt.
