FNArena’s Weekly Insights – April 24 2023
In this week’s Weekly Insights:
-Investing In Megatrends (The Other Ones)
-Research To Download
-FNArena Talks
By Rudi Filapek-Vandyck, Editor
Investing In Megatrends (The Other Ones)
Investors who felt safe hiding in lithium stocks supported by broadbased belief in the global electrification theme have had a rude awakening over the past four months as the price of lithium tanked by -50%-plus and share prices in the likes of Pilbara Minerals, Allkem and Liontown Resources are down by -25% or more.
This does not imply the global transition towards greener transport and electric power has been over-hyped. It does highlight that when it comes to industrial chemicals, metals and minerals, the short-term horizon is almost always determined by the balance between supply and demand – and history shows supply has a habit of catching up, eventually, as well as intermittently.
To put it bluntly: commodities seldom, if ever, move in a straight line. A similar observation today very much applies to producers of coal, the ultimate beez neez in 2022, while oil & gas producers are one of few sectors not posting a gain year-to-date. Uranium is widely believed to be part of the Megatrends story for the decade(s) ahead, but it’s not apparent from share prices in Paladin Resources or Boss Energy.
Megatrends (Supercycles) or not, commodities move through cycles, with often violent price corrections, in both directions, along the way. The promise of a super-sized gain on the way up will always remain too attractive to resist, while the threat of a While E Coyote dive-off-the-cliff is never far off.
To illustrate the dilemma, I have included the thirty year price chart of shares in Alumina Ltd, one of the longest listed commodity producers on the ASX.
