The Top 20 For 2022: Of course, at this time of the year, everyone and their mother deliver their list for the winners of the New Year, as I have in recent years. However, I wanted to go from a slightly different angle.
By Zak Mir
In some weeks I interview as many as 10 CEOs and many several times over the course of the year. One of the generally accepted rules of successful stock market investing is that you are investing in management, even more than the business model. It has to be said that the vantage point of being an interviewer can be the box seat as far as judging companies. For instance, it is rare an outperforming company is headed up by someone who does not impress either in an interview, face to face, or via their track record. Most of the 20 stocks included for 2022 are companies where the management are outstanding, and where there is not necessarily the case, the valuation or sentiment towards the group has sunk to “ridiculous” levels.
Finally, the selection is in the small-cap/microcap area – Elephants Don’t Gallop, remains the mantra. My influence has been and continues to be Gervais Williams of Premier Miton, and he continues to be an outstanding example in this space.
4. Open Orphan (ORPH): 23p Target 50p
While it has been a decent year for blue chips on the London market, for the small cap space it has been evident to date that investors have not been getting as much bang for their buck. Just how much reticence there has been was underlined by the recent newsflow from Open Orphan, the specialist contract research and vaccine / antiviral testing group. Going into 2021 the company was one of the stars of its space, given the way that it entered it just as the pandemic began and a light was shined on its business model. What has been interesting is that between November 15 and December 21, the company announced no less than four contract wins amounting to some £20m in value, plus Imutex Vaccine results and positive results from a Flu human challenge study. While the shares may be up some 15% over the period, this amount of fundamental fireworks on a £150m market cap company should and probably will be rewarded in terms of market cap during 2022. This is especially so considering the way that demand for OPRH’s services looks to be accelerating rapidly, and the company has stated it can scale up capacity with ease. In addition, we have the ongoing prospect of spin offs from Open Orphan to maximise shareholder value, of which the first, Poolbeg Pharma (POLB) appears set to make headway over 2022.
3. DeepVerge (DVRG): 24.5p Target 50p
As has been mentioned with reference to East Imperial (EISB), “the next” this or that is a common way of describing growth companies. Perhaps in the case of DeepVerge it would be the case that the company would be on a much higher valuation if it had an obvious peer comparison. However, CEO Gerard Brandon’s brainchild is a unique proposition. I suppose if one stretched things one would like to see DVRG spin off companies like Open Orphan (ORPH) has and should continue to do, but that is where the comparison ends. Brandon’s speciality is to turn around struggling companies. Of course, the skill is to identify which companies to turnaround and then to see them flourish. This is not a commonly held skill. Also, it is not easy to get your timing right on such deals. However, he hit the zeitgeist with Modern Water, and the rest of the vertically integrated company is also on the money in terms of its artificial intelligence, clinical research, medical device and life science offering. One of the sad aspects of the London market as compared to the US is that away from the resources space, valuations especially in the new economy tend to be far less than they would be in the US. Typically, one could add a zero to the market cap to get the equivalent Stateside market cap. In the case of DVRG, it currently stands on £50m, a seemingly ridiculous valuation given the offering it has on a fundamental basis. Unusually, this is a company that spans markets with clients from Governments, to B2B, and via Labskin, the consumer area, with all aspects scalable on a global basis.
2. Wishbone Gold (WSBN): 8.45p Target 20p
On a simplistic level, it may be said that as far as Wishbone Gold is concerned, the market was kinder to the company in 2020 when it was rather more blue sky that it now is that the beginning of 2022. This is nothing unusual, and should provide a decent opportunity during the next 12 months, especially if the rising inflation / rising Gold price scenario pans out as it should. With the stock around 8p in the wake of last month’s commencement of drilling at Red Setter, as opposed to 20p plus at the end of May, we are looking at a situation where the risk / reward appears attractive. We should not forget that this is the second Richard Poulden reboot in the top 20 this year, with Valereum Blockchain (VLRM) the top riser on Aquis in 2021. With WSBN Poulden made a successful switch to Gold in Australia, and Red Setter is the Jewel in the Crown. Red Setter is certainly rubbing shoulders with the stars. It lies on a 57.4 sq km wholly-owned EL45/5297 exploration licence, 13 close to both Newcrest Mining’s Telfer Gold-Copper Mine, and Newcrest and Greatland Gold’s (GGP) Havieron discovery in the Paterson Range of Western Australia. Indeed, the market cap of £15m means the company is priced at ground floor level / new listing valuation, without the prospective gains from Red Setter, White Mountain, Cottesloe, or Wishbone II, IV and VI.
1. Eurasia (EUA): 24.5p Target 50p
It has to be admitted that Eurasia was not necessarily going to be top of the 2022 list. The main reason for this is that the company already made its point as far as the bulls were concerned in 2020 when it came back from (unnecessary) suspension. However, it would appear that the court of Twitter, and private investors in general, regard this is a top play for 2022. While this is not necessarily a good indication of whether a company is capable of greatness, I would suggest that there are nevertheless plenty of positive factors to look at. The simplest one is that this is now a £700m company, having been up to £1bn at best so far. Despite all the mudslinging, distortion, character assassination and omission of the bears, EUA has become a mid-tier mining company, and given progress made in 2021, arguably the top tier in its space within the mining sector. I would venture to suggest that if it were not for the waiting game as far as M&A here and the slurs, its market cap would be well north of £1bn currently. Indeed, in many ways the heavy lifting here has already been done, with or without M&A. EUA has not only de-risked via this process, while we have been waiting, the latest Hydrogen and Ammonia projects JV have arguably made it a win-win whatever happens on the corporate action front.
Interestingly enough, it should be noted over 2021 the shares remained at the same starting price despite the flow of significant fundamental water having flowed under the bridge. For instance, the JV with Rogeo consisted of 104.6Moz of Platinum equivalent, and there have been a significant increases and upgrades in mining areas and assets across the enlarged portfolio. EUA will also be a significant Nickel player, and is clearly arm in arm with the Russian State’s mining strategy to propel this further. But above all, Eurasia has shown itself to be a proactive and aggressive player in its space. It could have just sat back waiting for a buyer. Instead, we have seen one of the most active examples of company building in the mining space in recent years, and is fully funded to execute the multi-pronged strategy in 2022 and beyond with minimal dilution. As things stand a sale would merely be the icing on the cake.
Finally, I hope the Top 20 Stocks Countdown for 2022 was of interest. Tomorrow will see a Top 10 Bulletin Board Heroes charts for 2022, so some of the stocks that could not be squeezed into this selection may appear there on a technical analysis basis.
Disclaimer & Declaration of Interest
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.
