Investor Webinar 18 January 2023: Weebit Nano, Graphite and how to rebuild your wealth after divorce

In this Investor Webinar we discuss:

– How to rebuild your wealth after a divorce

– There is a lot happening at Weebit Nano (ASX:WBT)

– Why we like Graphite so much!

See full transcription below.

 

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Transcription

 

Marc: Hello, and welcome to the “Stocks Down Under” webinar. It’s the 18th of January, 2023. Stuart, how are you doing this morning?

Stuart: It’s been a great start to the year. So, I’m looking forward to a lot of upside for us and for our clients.

Marc: All right, awesome. Well, we’ve got a lot to talk about. We’ll talk about graphite, we’ll talk about Weebit Nano because a lot happened there. We’ll talk about… And this is something off the beaten track, I think, for us at least, is how to recover your wealth after a divorce. And we’ll talk to an expert on this who’s gone through the motions, but let’s start off with… Sorry, Stu. But let’s start off with something that we just wanted to bring to your attention, which is our weekly newsletter. It’s really simple.

What we do in our weekly newsletter that we send out every Saturday morning, we basically collect everything that we wrote about in that particular week. So, that could be about a stock, about a sector, the videos that we do, like interviews with company management of ASX-listed stock. So, everything that we do in that week will be sort of, you know, summarized in that newsletter. We publish that on Saturday morning at 8:30 East Coast Time. Basically, it’s really easy to sign up. Just go to the “Stocks Down Under” website and click newsletters. There’s the archive there, and also the link to sign up to that. So yeah, do yourself a favor, sign up for that. We’ve got great feedback on that from a lot of people that have subscribed in the last couple of months. We’ve been running this now for three months, I think. So, it’s basically a summary of what happened on the ASX during the week. So, we just wanted to bring that to your attention. Go to stocksdownunder.com to sign up.

Then, Stuart, I mentioned it earlier, you’ve gone through this painful process called divorce, and it is a lot of, you know, sort of elements and angles to that. But one key thing that we’d like to focus on today is how to rebuild your wealth after a divorce because for a lot of people, that’s sort of daunting, right? They’ve lost a lot of what they had and where to go from there.

Stuart: Yeah. So, as we’ve developed our “Stocks Down Under” concierge product, which we’ll talk about in a moment, we’ve encountered a lot of guys who are in a similar situation to what I found myself in several years ago…

Marc: And girls

Stuart: And girls too. Yeah. Who found themselves divorced and wondering how to rebuild their wealth after that. Going through my divorce which happened several years ago, there’s a lot of help that you can find out there. Go back one slide, Marc, we’ll get to that one in a moment. There’s a lot of help out there but not many people focus on this category, and I think at “Stocks Down Under” concierge, this can probably be something we can actually help with. So, I wanna talk about some insights that I had coming out of that experience and what to do at the other end. First thing I’d say is read this book, “The Richest Man in Babylon” by George Clason. I’ve been seeing this on the shelves at all good bookstores for years, thinking, what kind of nonsense is this book? Last year I actually read it. Book’s been around since the mid-’20s, and it’s a series of stories told in an old-fashioned style as though it was in ancient Babylon. But it’s basically just practical tips on wealth creation.

Now, you and I both investment professionals, Marc, but I’d never actually stopped and thought about some of the fundamentals of how you actually build wealth from scratch. If you’ve gone through a divorce, sometimes you didn’t have to think about that before, so I encourage people to get hold of that book. What are the important things you need to do? First of all, get your divorce done. No point thinking about your rebuilding if there’s still stuff to take care of in terms of, you know, financial settlement and so forth before that. So, don’t even think about wealth creation, or at least put it to the back of your mind until you can be done and dusted.

The next thing I’d say is get your head clear. Anecdotally, one’s well-being returns to normal by about, take the number of years you were married, divide by four, and that’s your recovery time is what some people think. Now, it’s different for some people, from others. When “The Telegraph” in the UK surveyed a cross-section of its readership who’d been divorced, how long did it take you to recover? And I don’t mean financially, I just mean in terms of your sense of personal well-being. The average time was 18 months. And that’s what I mean about that second point there. Get your head clear. Once you can honestly say that you’ve recovered emotionally from what’s just happened to you, then the coast is clear to think about going on to rebuild wealth.

Third thing I say is go looking for professional help, and, you know, shameless self-promotion from us. So, you know, we fit in that category. People that you can work with to advise you on building wealth. A lot of people who’d be thinking about this, for example, didn’t think too much about building their own portfolio. They probably had a lot of wealth put into their own house. Suddenly that house is in the hands of the other spouse or the former spouse, and they’ve gotta think about how to go build that. We would advise people to focus on equities rather than property because of the ease with which you can trade the assets in question, but I’d go and read a few books on investment, and in particular, our articles. So “Stocks Down Under” concierge is ideal for people who’ve got to this point, where their head’s clear, they know what their financial position is post-divorce, and they’re ready to rebuild. But I think the thing I need to emphasize most strongly is get your head clear. If that takes five years, don’t try to rebuild your wealth when you’re still mucking around in your head.

Marc: Right. We published an article on this yesterday on the website. So, on insights. Go to the website, click Insights, and you’ll find it there under articles.

Stuart: What not to do. The temptation will be to take excessive risk. Suddenly a big chunk of your wealth is gone to the other party. And so you’d be wanting to punt on stocks that are not necessarily good for your natural risk appetite and probably not good for your portfolio if the truth be told. Watch out for that. Also, make sure you do your homework on a stock. You know, as Warren Buffet says, buy your stocks like you would buy your groceries.

And make sure there’s enough cash in the portfolio. You never know what’s gonna come around the corner, that means a sudden drawdown. For instance, matters that are still related to divorce, like legal fees, for example, that you thought you’d paid and you haven’t. We recommend probably staying at least 10% in cash, good markets or bad, so that you do those things. The temptation will be to put everything into the market, that’s not a good idea. So, we’ll do a bit more thinking about this. We’ll probably do a few more webinars on the subject, especially for folks who are thinking about this, but that’s a few preliminary thoughts on the subject, and we’re here to help. Talk to our colleague, Peter Kilby, sign up at “Stocks Down Under,” and see if we can’t be part of that rebuild process for you.

Marc: All right. Well, that’s good to hear from someone who’s been through it. So thanks for that, Stu.

Stuart: Oh, and don’t get divorced. If you can possibly help it. That’s my number one piece of advice.

Marc: That’s a good one.

Stuart: That includes you, Marc. Listen carefully to what I’m telling you.

Marc: I’ll try my best Stu. All right. Well, so I’m married to my wife, but I’m also, dare I say married to this talk that we’re talking about next? Because I’ve been invested…

Stuart: Did your wife know about your love of the stock we’re about to talk about?

Marc: Yeah, she does. Yeah. She knows this is my mistress. But, you know, luckily enough, it won’t lead to divorce if all goes well. But I’ve owned and followed the stocks basically since listing, which was in 2017. So we’ve covered it with Pitt Street Research for a long, long time. So, we know this talk quite intimately. Of course, we’re talking about Weebit Nano, and yeah, as I put it here, the gift that keeps on giving because this one has been… It’s had, like, many stocks, it’s ups and downs. But we’ll talk about what happened in the last couple of weeks in terms of share price. But yeah, over the long term, it’s I remember it listed around 1.7 cents, then there was a consolidation after that, and it’s been going up ever since, basically with the ups and downs, obviously. But this is what happened in the last sort of, you know, since October.

So what’s that? Like four months? At $2, it was at that point. It’s basically more than doubled since then. And I’ll show you another chart just after this, but it’s had a massive run essentially, since October. And we’ve been at that level a bit earlier in the year as well, in June. But now finally, we cracked the all-time high that was a couple of years old. So, if we zoom out, which you can see here, is those two spikes that we saw a few years ago. The big difference now though, is that I think this time around, the increase in share price has been much more gradual, even though looking at that chart, it’s still pretty steep. But what happened in previous spikes, so back in 2021, basically these spikes came out of nowhere or based on announcements. So, you see a massive increase in share price, high volumes, but stock came crashing down just as fast, right? I think this time around, and of course, only time will tell, but I think the build-up to where we are now around 4.35, and we were at 4.65 intra-day yesterday, I think that increase has been much more gradual. So less hype, so to speak. And I think that’s good for any stock. If you go up gradually over time, I much more prefer that over, you know, the spikes that you see and then the subsequent drop in share price.

Stuart: Well, and Marc, no surprises, you’ll speak in a second to the big breakthrough recently, the ability to make Weebit’s version of memory at 22-nanometer scale. That’s never been achieved in human history, right? So this company is truly groundbreaking. And having reached that technical milestone, it’s easy to build it from there, to create some real shareholder value.

Marc: Absolutely. Yeah, I’ll talk briefly about that because there’s a lot of stuff probably coming in terms of, you know, milestones that the company has said it would reach this year. But we’ll talk a little bit about that. So, but yeah, in essence, they’re doing something, there’s an opportunity that’s massive once in a lifetime, as the CEO once put it to me, to capture that. So the price target we had on Weebit Nano, and this is a research that we did with Pitt Street Research, and for people that don’t know Pitt Street Research, it’s a parent company of “Stocks Down Under.” So Pitt Street Research was around six, seven years ago and out of that, we created “Stocks Down Under.”

So Pitt Street Research is where it all started. We’ve been covering this stock for a number of years now, but the price target we have on Weebit is 4.75. And have a look at the page, pittstreetresearch.com/weebitnano, that’s where we have all that research and look at the report from January 21, where we talk about that price target. We’re almost there. But what’s next for Weebit Nano? So there’s a lot happening in the background. And as the company’s mentioned several times, we’re talking to basically, well, not all but a lot of the top 10 foundries in the world. So I’ve put that list there on the left. These are the top 10 computer chip foundries. So these are companies that manufacture chips for third parties.

So let’s say Apple wants a new bionic chip, they’ll go to TSMC and TSMC will build it for them, and then that get shipped off to Foxcon, and they will assemble it into the new iPhone, right? So that’s how that works. That’s the top 10 over there. Well, TSMC is the biggest one in the world but they have their own version of Rerem, so take that out of the equation. Then there’s a few Chinese companies in there SMC, Hua Hong and Nexchip. These are Chinese foundries. And although Weebit, it’s got an agent in China, right now, you know, things are a bit finicky with the U.S. and, you know, the chip war, basically that’s going on. So for now, let’s take out these Chinese companies as well. And what you’re left with there is the number two, Samsung from Korea, UMC from Taiwan, Global Foundries, which is based in the U.S. but it’s got facilities in Europe as well, for instance. PSMC, VIS, these are again, Taiwanese companies and Tower Semiconductor, which is Israeli and has been acquired by Intel.

I’m not 100% certain if that deal has been approved yet. But it’s obvious to see, you know, that this list of companies basically, Weebit Nano said we’re talking to most of those. So yeah, take your pick. And obviously, Tower is Israeli and acquired by Intel, and of course, the chairman of Weebit is a former number two at Intel. So those connections are really, really short, I guess. But that’s what’s happening. So what we expect this year is hopefully some more deal announcements, announcement of technical milestones and really expanding the opportunities. And this is what you alluded to earlier, Stu. Basically there are three pillars that Weebit is working on, embedded memory, which is small amounts of memory into devices that sit on top of the actual device. So not next to a particular chip, but right inside that chip. And a lot of power management chips have that basically any edge device. So anything on at the edge of the internet, which could be a phone, a sensor, anything that will need embedded memory. That’s one pillar that they’re working on, and that’s closer to commercialization.

Then there’s the second one, which is discrete memory or standalone memory. These are basically memory chips that you could use in a smartphone or in a data center that are used to store large amounts of memory. Now, that vertical in itself is really interesting because for large memory sizes, let’s say anything above 512 megs, you will need a selector. And Weebit’s talked a lot about that. So, if you go large with the memory, you need a selector so you can address each and individual cell in the chip. It’s really important. But there’s also a whole very big markets for a standalone memory that is smaller, smaller than say 512 megs where you don’t need a selector. So that’s a market that potentially could be addressed already. So that’s interesting.

And then there’s a third pillar, but this is a couple of years out which is neuromorphic processing. And there you get sort of in the area of brain shape, for instance, they’re doing something like that. You could do that with Rerem as well, but that’s a couple of years out, so don’t focus on that for now. But the first two pillars are really interesting. And so that’s what’s coming, and that’s the opportunity that Weebit’s got and that’s why we’re so keen on this stock. So why we like it so much.

And by the way this is interesting. One of our subscribers yesterday emailed us, said, look one of your competitors, if you can put it like that, actually put a sell on Weebit yesterday when it hit 4.65. And he said, you know, I actually think that these guys and some others out there are actually basically borrowing your research, so to speak, and putting their own name on it and tweaking it a little bit and putting it out as their own. Well, for those people, you know, the message is we’ve been covering this stock since 2017, and Stuart, the market knows you as Mr. Biotech. I’ve got a quite extensive experience in semiconductors. I think if you’re looking at those two sectors, there’s probably nowhere else to go then Pitt Street Research and “Stocks Down Under,” am I right?

Stuart: Right.

Marc: So yeah, in terms of research make sure you subscribe to Pitt Street Research, but also try out Concierge because that’s where we talk about all these sorts of stocks. I’ll leave it there, Stu, because we could talk about Weebit for days on end, I think, but let’s just leave it there and move to our final topic for today, which is graphite. We get a lot of interest from our strategy in graphite, Stu.

Stuart: Right. So, why we talk about graphite because it’s the other half of the lithium-ion battery. If lithium is the thing because of the rapid electrification of our economy and transportation system then graphite’s gotta benefit from that because the two mainstays of the lithium-ion battery are lithium for one end, and graphite for the other. So what is graphite? Let’s just review what we know about this. Natural form of carbon, usually has gone into refractory applications, although it shows up in lead pencils, for example. But it’s needed more importantly these days in the anode of lithium-ion batteries. So, lithium gets all running in terms of investor attention, graphite kind of gets left behind.

A while ago, we had some questions related to graphite. Someone was talking about evolution energy materials. You’re keeping an eye on that one. Yes. And the reason is a lot of the world’s high quality of graphite comes from Tanzania in East Africa, and so you’ve gotta keep an eye on what’s going on there. Tanzania is a great place to invest in. When president John Maghufuli died recently and was succeeded by his then vice president, Maghufuli ran a pretty tight ship in terms of his government, but the country wasn’t regarded as investor-friendly as it is now. So now that it’s perceived to be easy to do business, companies that are involved in Tanzania are worth paying attention to. We’ll talk a bit more about that later on. Let’s just move on from that slide there, Marc.

To talk about the thing you already understand with graphite, it’s known by its flake size. So natural graphite, the stuff you dig out of the ground is flake graphite. And the reason is because when you break it up, it breaks off in flakes. And so there are five basic size of flakes, fine, small, medium, large, jumbo. Well, actually six, if you throw in super jumbo. And the smaller grades are the ones you need for lithium-ion batteries. You polish them down and then spherinize them so that they’re then ready to go into batteries. The technology isn’t so advanced that only a few companies control this. It’s more a matter of setting up the supply chain so that you can source the graphite, process it downstream, and then ship it off to people like Tesla and others who are rapidly building the infrastructure outside of China to supply the end materials to the battery makers. So why now for graphite?

I don’t have to tell you that lithium has been hot since of 2020, particularly in 2022. And into 2023 I’m predicting that graphite will be, well, people will pay more attention to graphite because the price will get a little bit more transparent and equally, the demand will keep track. Both commodities are expected to in increase demand, at least fivefold between now and about a decade from now. I’ve talked before about Syrah Resources. The chart of that one still looks particularly good. And it’s the flagship for everything else that I think can follow in graphite. They own the Balama Graphite Mine in Mozambique which was closed for a while during the bad times in 2020, reopened in March, 2021. But the big value driver here is a downstream facility in Vidalia in the U.S. state of Louisiana, where they’re gonna produce active anode material that can then be supplied to Tesla and others. So you’re talking about a fully integrated graphite player where they’re earning decent money from the mine in Mozambique, but the big money is coming from the downstream development in Vidalia.

So, this stock has performed very well from the time we first started talking about it. There’s a decent article in the 10th of March, 2022, which is addition of resources “Stocks Down Under.” The story continues to get better, pretty much they’re on track to get Vidalia done over the next couple of years and start contributing in a serious way right ahead of this boom that’s going on in battery-making in the U.S. United States is determined to get as much of the infrastructure of the lithium-ion batteries away from China, and a lot of investment is going into that space within easy driving distance of where Syrah is in Louisiana. Three graphite stocks to pay attention to, I mentioned Evolution Energy Minerals before, Black Rock Minerals, which I own that stock developing the Mahenge graphite project and currently looking to fund that and take it forward. And then there’s Walkabout Resources with their Lindi graphite project. So there’s a few graphite stocks to pay attention to on ASX.

Marc: All right. Well, a lot to digest. We’ll leave it there because Stu, we’ve been jabbering for more than 20 minutes now. But…

Stuart: Speaking with us, viewers, we appreciate it.

Marc: Absolutely. So, we’ll catch you next week. And in the meantime, happy investing. We’ll see you next week.

Stuart: See you next week.