Friday Beers with Marc & Stuart: Make money, not war!

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In this episode of Friday Beers with Marc & Stuart:

– Marc analyses the war in Ukraine
– Oil & Gas ain’t dead
– Our gold call is playing out
– Stuart is boycotting Russia
– Happy International Women’s Day
– Marc discovers the element of Ukranium
– New research on Delta Drone
– Name that Stock!
– A fail from Bent Spoke?

 

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Transcription

 

Stuart: It’s Friday afternoon in Sydney, and that means it’s time for “Friday Beers with Marc & Stuart.” I’m Stuart Roberts.

Marc: I must be Marc.

Stuart: And we’re the founders of Stocks Down Under, Australia’s leading investor publication, five days a week, one great idea in every edition, and go Ukraine.

Marc: Go Ukraine.

Stuart: Marc, you have some opinions about what’s gonna happen in Europe, and what that could do to equity markets.

Marc: Yeah, look, we’ve seen what can happen during these times, right? A lot of risk-off initially, and today, or yesterday I should say was a good day. The market, sort of, rebounding a little bit, energy prices coming down, but given the way this is…

Stuart: Your health, sir. Here’s to surviving World War III.

Marc: The way this is going for Russia right now, and I’ve been following this quite intensively on Twitter, and there’s a lot of people on Twitter who actually know what they’re talking about. So, a lot of these people are from European think tanks or U.S. sort of institutions that have been tracking geopolitics for decades.

Stuart: This is not the experts on Covid who’ve now become experts on the conflict?

Marc: Yeah, exactly. These people actually know what they’re talking about. So, but if you look at what they’re saying and, sort of, you put the pieces of the puzzle together, it’s obvious that things have gone really badly for Russia, but the thing is even if they “win,” you know they capture some of these cities, it’s gonna be a guerilla warfare, urban warfare. And they’re just not equipped for that because I think they’ll be outnumbered, first of all, and they don’t have the…

Stuart: People forget they were bogged down in Chechnya for a long time.

Marc: Yeah, so there’s no win for Putin here.

Stuart: Right.

Marc: And I think they’ll end up at the negotiation table pretty soon. And of course, all these sanctions that will…even if they reverse them, they will still take some time to be reversed completely, although we’ve only just started them. But I think, in a nutshell, this situation will be resolved relatively quickly, is what I think. I do think energy prices will remain elevated for a little while to come. So, that will trickle down into inflation, but the general market, I suspect, will be sort of “back to normal” despite everything that’s happening in the Ukraine, which is horrible, obviously. But the markets themselves, which are rational, will return to normal quicker than most people think, in my view.

Stuart: Right, right. Now, how do we play the market in the current environment?

Marc: Yeah, that’s the million-dollar question, right?

Stuart: Right, right, okay.

Marc: It’s tricky because if you don’t know what’s going to happen, it’s just so much uncertainty, it’s fine to just stay on the sidelines for a little while, right? Keep your powder dry, keep your cash where it’s safe, and then make a decision, you know, a bit later on once the dust settles. And it’s fine, you’ll miss the either first upswings or downswings depending on what’s you’re playing, but it’s perfectly fine to just sit this out for a little while.

Stuart: Right, I will put in a word for oil and gas stocks. As you know, I’ve been quite bullish on the sector ever since the infamous minus $27 a barrel mode in April or May of 2020. I’ve noticed that companies like Santos, their share price is still below the peaks prior to the corona crash of 2020.

Marc: And that’s including…?

Stuart: Including the absorbing oil surge in the process of that. So, we’ve got ample gas resources ready to take advantage of the looming east coast gas crisis we’re gonna see in the next two to three years, or maybe even two years.

Marc: Right.

Stuart: And you’ve got all the LNG upside that oil surge was working on, and what this crisis exposed is the weakness of waiting for renewables to step up to the plate in an environment where the world economy is taking every barrel of oil it can get. And you can suddenly lose you know, 7 million barrels a day from Russia, for example. So, I think this is gonna be good for a long-term rewrite of a lot of companies in that space.

Marc: All right.

Stuart: And it’s also been good for at least one of our predictions for 2022 coming true, which is that gold would go over $2,000 U.S. dollars an ounce.

Marc: Yeah, but it’s right back down to $1,970 [crosstalk 00:04:04].

Stuart: All right, all right, we didn’t say it wouldn’t fall.

Marc: It was only for one day, but you were right, and $2,050, that’s well above $2,000, right? So, yeah, you will know.

Stuart: Now, Marc, a lot of major companies are boycotting Russia now. You’re seeing all the old companies divesting. You’re seeing major brands leave the country. Well, I’m introducing a boycott of my own.

Marc: Which is what?

Stuart: And Vladimir Putin needs to be scared because I am boycotting dating Russian models.

Marc: Russian models? So, technically you’d be girl-cotting? And actually, that’s not fair, that’s sexist. It should be date-cotting or non-binary-cotting, which opens up a can of worms when we talk about…So we have International Women’s Day, right, the other day.

Stuart: Women’s Day. So I wanna pay tribute to International Women’s Day, to a lot of the women we’ve met in the course of our work at Pitt Street Research and Stocks Doen Under that are running ASX listed companies. Marc, have a guess of the top 1,800 companies on ASX, how many of them have a CEO or an executive chairman, a chairperson who is a woman?

Marc: Not a lot. I think about 4.9% or something?

Stuart: I really should not have told you before.

Marc: No, you shouldn’t have.

Stuart: Well, yeah. The correct answer is 4.8%. You missed it.

Marc: Ah, I missed it.

Stuart: Yeah, 4.8% of companies on the ASX are run by women. Now, what’s interesting is you split it up by segment. In the top 200, 6.5% of companies are run by women. Step down to companies 201 to 400, it becomes 4.5%, 5% for 401 to 600. Then it’s only 2% of companies captained in the 601 to 800 range. So, what that’s telling you is there’s a dearth of women running mid-cap companies who can then step up to the big stuff. So, where I think companies have to do better…or sorry, where women have to do better is getting to the middle rungs so they can then jump up to the top rungs. Now, directors across the borders, it said that 12% of all directors across the board are female. So, that’s progress, but I think people would argue there’s more to be done if you can move to anything like gender equity.

Marc: Yeah, but I’ve noticed that these days, with all the wokeness, it’s hard to make jokes in this environment, right?

Stuart: Yeah.

Marc: For instance, about women on International Women’s Day.

Stuart: Right.

Marc: I got some flack for that, so this picture that you see right here, that one, people didn’t like that one and I thought it was pretty funny.

Stuart: No sense of humor.

Marc: No sense of humor. It’s not racist, it makes a bit of fun about a known, sort of…what’s the word here? That the perception that men are better drivers than women, right? So, this plays on that, so where’s the harm, right? But a lot of people didn’t like it. I was like, all right, I’ll shut up then.

Man: Fuck you, fuck you, and fuck you. Who’s next?

Marc: Still, one of the other predictions we made late last year was uranium.

Stuart: Right.

Marc: So, how’s that one playing out?

Stuart: Well, it’s bumping up against $50 a pound. It’s done that about four times in the last six months. But Marc, I was very impressed with the take you had done in terms of Western Europe being able to double down on nuclear energy in the light of some policy changes you’ve seen in Germany happen just recently. Talk to us about your thesis there.

Marc: Yeah, look again. Coming out of that war with…the Russian-Ukrainian war. It’s become extremely apparent that Western Germany…sorry, Western Europe, Germany in particular, is extremely dependent on Russia and, of course, they’ve been gradually moving away from nuclear energy. And I think what we’re seeing now is a possible switchback, a transition back to nuclear energy because even the wokies, the lefties think it’s okay now to start using more nuclear energy.

And, of course, Fukushima was 10 years ago. Didn’t do the industry any favors. I think we’re seeing a move back there as well. So, the dependence on oil, as clear as it is for everyone now, and gas, Russian gas, I think will potentially drive a move back to uranium needed for nuclear energy. So, that $50…what is it, $50 a pound?

Stuart: That resistance level is gonna get tested again before this crisis is [inaudible 00:08:24.049], I suspect.

Marc: Yeah, and look, it’s a longer-term development, right? So, this is not happening overnight, but I suspect some of these ASX-listed Ukranium…uranium plays…

Stuart: Ukranium. Marc’s just discovered a new chemical element.

Marc: Yeah, where is it on a periodic table? Ukranium. But that’s gonna be an interesting one to watch.

Stuart. Right. Now, Marc, changing subjects, we’ve just published some research on Delta Drone. Talk to us about Australia’s newest drone company.

Marc: Yeah, so interesting one. It’s a drone as a service. So, a lot of drone companies, sort of, deliver “hardware,” so to speak, but these guys…

Stuart: I’ve been known to drone as a service at various speeches I had to make over the years.

Marc: Right, that’s [inaudible 00:09:06.332] as a service.

Stuart: But sorry, talk to us about the machines known as drones.

Marc: Yeah, so these guys, Delta Drone provide drone as a service all day. They can train the pilots, they can service companies that need, sort of, bird’s eye view or top-down view of their assets. Could be mining, could be agriculture, and so that’s a big growth market. They made the move to Australia, so I think there’s a lot of addressable markets for them here.

Stuart: Is that particularly in the mining industry?

Marc: And agriculture, yeah. So, they’ve got business activities in Africa and now they’re moving here. So, the report on that one is on the Pitt Street Research website. So, take a look. We’ve got very high hopes for them.

Stuart: Right, and that brings us to name that stock. I’m gonna describe two companies to you and you have to tell me what the company is.

Marc: All right. Be gentle with me, because I’m not good at this. There’s too many companies on ASX.

Stuart: I’ve stuck with ASX 200 companies just to make it easy for you.

Marc: All right.

Stuart: Okay, so who am I? I was founded in Adelaide in the 1950s to explore for oil.

Marc: That doesn’t help.

Stuart: And I made the first Cooper Basin gas discovery in 1963, and more recently I took over an oil search. I’m now a leading oil stock on ASX.

Marc: All right, yeah, I know that one. That must be Santos.

Stuart: Ah, well done. All right, the second one. Who am I? I’m one of the largest companies in Western Australia, but recently my CEO decided to operate the company from Melbourne because it was difficult moving in and out of the state of Western Australia. I’m a major retailer of hardware, as well as supermarket owner. And I had my origins as a Western Australian farming co-operative.

Marc: Is it West Farmers?

Stuart: Oh, yeah.

Marc: See, these ones I get if you give me the proper queues.

Stuart: All right, now give me the hard stuff.

Marc: All right.

Stuart: They don’t call me Ticker Man for nothing.

Marc: All right, first one is a company that started life on the ASX out as a company called Ahalife. It’s renamed itself, rebranded itself, and 50% of the name is the same as 50% of the name of an ’80s hip-hop band in the U.S.

Stuart: Okay, is it Design Milk?

Marc: Yeah, it is. Ticker DMC. I never thought you’d get that one. How do you know that one?

Stuart: I’m Ticker Man.

Marc: Right, okay.

Stuart: I will leap tall ASX codes in a single bound.

Marc: All right, second one.

Stuart: Faster than a graphite stock on a tear.

Marc: Crap, I thought that was the hard one. So, the “easier” one now.

Stuart: Okay, right, right.

Marc: So, I’m a company based in WA. I help companies store their point clouds, point cloud data in the cloud, obviously.

Stuart: Yeah, yeah, sure.

Marc: Who am I?

Stuart: I am Pointerra.

Marc: Yeah. Wow. Two for two. That’s good stuff. So, we don’t have a winner.

Stuart: Okay.

Marc: Does it matter or should we do another one?

Stuart: So, no, we’ll do this. Okay, why don’t we have the Ticker shootout at this point?

Marc: All right.

Stuart: I’ll ask you a third one and we’ll see how you go.

Marc: All right.

Stuart: Who am I? I’m a property company, and I share the same name as an American actor who appeared in “The Blues Brothers.”

Marc: First name or last name?

Stuart: Well, I’ll leave that up to you. There’s only a limited number of actors in “The Blues Brothers,” right?

Marc: Yeah, I only know two, and Aretha Franklin.

Stuart: It’s not Cab Calloway.

Marc: You had Belushi and you had…what’s the other guy? It’s one of those aha moments. What’s the other guy? I give up.

Stuart: All right, it’s Goodman Group.

Marc: John Goodman?

Stuart: John Goodman.

Marc: Ah. All right, all right, that was a good one. A Goodman one.

Stuart: So, I won the penalty shootout, but you might as well give me a third Ticker.

Marc: Yeah, because the other side also gets a penalty shootout.

Stuart: Right, okay, yeah. All right.

Marc: All right, so again, this is a company out of WA.

Stuart: Okay. We like WA at this firm.

Marc: This company provides cloud-based services to help mining companies manage their ESG better.

Stuart: Okay.

Marc: Who am I?

Stuart: DC Two.

Marc: Eh. I’m K2FLY.

Stuart: Right, okay, yeah, all right.

Marc: I won this one. I beat Ticker Man, yeah. All right.

Stuart: Marc, it’s now time for the beer.

Marc: Is it? Wow, time flies.

Stuart: So, this is one of the latest offerings from my favorite Bentspoke Brewing in Canberra. It’s called Hop Juice and they’re calling it JP Ale. JP is short for Juicy Pale Ale. So, it’s when you hop things up, but try and get as many of the citrus flavors out of the hops. Frankly, it wasn’t doing it for me. Didn’t feel as fruity as I’d like, and you could barely taste the malts through the hops. So, this is a rare fail for the Bentspoke crowd. What did it do for you?

Marc: I quite like it, actually. Yeah, I never try to be preoccupied with the hops and the juices and all that stuff.

Stuart: Yeah, yeah, so I want to actually see if they’ve actually put some fruit flavors in here. I’m looking at the can. It says, “Hops.” It’s right up there on the hops, but you can’t actually see those. Malt, about middle of the range. Obviously, it can’t really cope with their malts what I’m noticing.

Marc: It’s what I found, yeah.

Stuart: But then it says, “Fruit,” and we’re up near the top, so I’m wondering if it adds some more?

Marc: Fruity, yeah. Bit fruity.

Stuart: Yeah, yeah, so I mean look, it was Mardi Gras last week. Maybe this was on the shelf until then.

Marc: So actually, Stu, that’s a first as well for Friday Beers, where I actually liked a beer you don’t.

Stuart: Right.

Marc: Wow. This edition keeps on surprising.

Stuart: Right. Now, if you haven’t subscribed to Stocks Down Under, you’re missing out on five great ideas every week for 52 weeks of the year, and at a very reasonable price. So, do yourself a favor and do your portfolio a favor and subscribe to Stocks Down Under.

Marc: Cheers.

Stuart: See you in a couple weeks’ time.