There was a slight problem for those looking to pick the winners for 2022, this time last year. At that point, hardly any of the black swans that we are now all too familiar with, war, inflation, rising interest rates, and ultra-high taxation, were on the horizon.
Trader’s Cafe with Zak Mir: Stocks For 2023 Countdown 10 to 6
5) Arrow Exploration (AXL): 16.75p Target 40p
Although Arrow Exploration has been on the stock market for just over a year, the Colombia focused hydrocarbon play can already be classed as a safe pair of hands. This is said not only in terms of the shares which came to market at 7p, and recently peaked as high as 21p. There is also the matter of the board of the company, which is very much in the blue chip category in terms of notches on its belt and experience. All of this comes to a group with a market cap of £37m. CEO Marshall Abbott has led the company to be able to say that it is on track to achieve 3,000 barrels bopd within 18 months of listing, announced in the wake of record Q3 results as EBITDA rose from just under £1m to £4.6m. Those in the know regarding AXL are pointing to it being debt free, producing $2m of revenue per month, and therefore fully funded with $14m in cash as well as incremental production. With additional production set to come in imminently and going into 2023, there is the prospect by mid 2023 of a considerable ramp up in output as new wells come on board, leading to as much as 10,000 bopd, and a dividend payout in the manner of say, an i3 Energy. Given how long the shares have been consolidating in the upper teens, one would expect that the next time AXL shares break the 20p level, they will break higher for good.
4) Poolbeg (POLB): 6p Target 15p
While Poolbeg is a company which gets decent coverage as things stand, and has delivered strong newsflow over the course of 2022, the angle here is two pronged. The first driver is that after something of a hiatus in pandemic related news, it may be that the latest developments in China’s Covid surge, bring companies such as Poolbeg (POLB), Hvivo (HVO) and Novacyte (NCYT) back in focus with investors. The second driver with Poolbeg though is its position relative to Artificial Intelligence, something which we have been reminded of in the last month since the launch of ChatGPT. This has set social media alight, and it could very well be the case that once investors realise the potential leapfrog effect of AI in all areas of science and technology, they will appreciate the moves Poolbeg has made in this area all the more. To date we have read announcements that in November, the first of which centred on an AI programme leading to novel Respiratory Syncytial Virus drug targets. Later in the month there was news of the construction of the computational artificial intelligence influenza disease model being completed by CytoReason Limited. All of this is actually by definition even better than rocket science, and it could very well be the case that the market starts to appreciate the value of such game changing progress. The combination of Poolbeg’s data and AI really does offer an exciting prospect for 2023.
3) Reabold (RBD): 0.21p Target 0.5p
There is perhaps something of a coincidence to pan out in terms of Reabold being the next Prospex (PXEN), as far as being one of the most potentially outperforming stocks going forward. This is because in the autumn of last year Prospex survived a potential boardroom shakeup, something which now gives the impression of being a move to get control of a company at an opportunistic part of the cycle – just before things take off. In the case of Prospex the shares have quintupled since the rebel attack was seen off. A similar aftermath could be the result in the wake of recent failed moves for change at Reabold, something which the company has successfully seen off. In such situations shareholders can become unnerved, and the share price can suffer. However, now that the ordeal is over, we can expect sentiment to return, and the merits of the current management to be appreciated rather more than they have been to date. Indeed, so far little of the merit of the company’s sale of Corallian Energy to Shell has been factored in, or the prospect of a £4m distribution to shareholders. Reabold has said that it will use the proceeds of the £10 million sale to advance the development of its West Newton asset. Strangely, its valuation on Reabold’s books by the market is at a deep discount to that of Union Jack’s (UJO) 17%, even though Reabold has a 56% stake in the project. Such factors can be expected to be resolved positively for RBD now that recent requisition issues are out of the way.
2) Alkemy (ALK): 255p Target 750p
Being right on cue with newsflow is one of the best signs of future success and share price outperformance for small cap companies. This is what we have seen executed to perfection at Alkemy, the owner of Tees Valley Lithium. The goal here is for the company to develop projects in the energy transition metals sector, and this autumn saw major milestones achieved. The fun started, bringing Alkemy to investors’ attention with the announcement in October of Tees Valley Lithium entering into a MOU with bp Alternative Energy Investments, a subsidiary of BP (BP.). This announcement in itself flagged ALK’s pedigree, and subsequent news regarding planning permission being granted to develop Europe’s largest Lithium Hydroxide Refinery in Teesside, as well as a long Term Lease Agreed for TVL’s lithium processing facility have been the icing on the cake. With only some 7m shares in issue, largely owned by management, one would expect Alkemy to squeeze higher over the course of 2023, as further milestones are hit. The urgent need for the world to wean itself off dependence on China for its minerals processing fundamentally underpins the Alkemy story.
1) Hydrogen Utopia (HUI): 16p Target 50p
The winner as far as stocks to watch for 2023 has already proved itself in the most difficult fashion during 2022. Listing on Aquis in January at 7.5p, the waste plastic to energy group is set to hit the standard list of the LSE in January, quite a feat given the minimum £30m market cap requirement on this exchange. This is the equivalent of climbing the north face of the Eiger, given stock market conditions over the course of 2022 where so many IPOs are underwater. Having achieved its escape to victory, and with the stock tightly held, we can expect much more buying interest once the company is on the main board, especially on the institutionally side. The stock is already being actively marketed on the OTCQB in the U.S. as well as being listed on the Frankfurt Stock Exchange. CEO Aleksandra Binkowska has been proved exceptional in getting the footprint of the company on the international stage, a point underlined by the relationship with German hydrogen industry giant Linde. Indeed, the latest break for the shares through the 15p warrants zone means that those who do exercise can gain a tax free stock boost in their ISAs / SIPPs. The drivers for 2023 apart from the listing upgrade are the ongoing energy crunch post Ukraine as well as the need to address the waste plastic crisis. With HUI’s market cap now well above its peers, one can expect the former to overtake the latter in the next 12 months in terms of getting the first plant over the line, and the subsequent rollout all over Europe.
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The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.
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