Two stocks we like in the lithium and copper space
In this week’s video insight David interviews portfolio manager of the Montgomery Small Companies Fund Gary Rollo to discuss the significant tailwind of decarbonisation and the ramifications for Lithium and Copper. The two stocks in focus include Pilbara Minerals (ASX:PLS) and Aeris Resources (ASX:AIS) and which, on a combined basis, make up more than 5 per cent of the Montogmery Small Companies Fund portfolio.
You can watch David’s previous interview here: Two travel stocks the small cap team likes
The Montgomery Small Companies Fund owns shares in Pilbara Minerals and Aeris Resources. This video was prepared 04 August 2021 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade these companies you should seek financial advice.
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
lakun agrawal
:
Hi David, great video thanks.
Question: If the fundamentals of the EV market point to rising Lithium prices due to increased demand vs supply, could investors simply buy ETFs or trade CFDs on the Lithium price, to access the expected price improvement, rather than invest in a company like PLS? Companies that mine Lithium should see profits rise because of commodity price increases, but they also have all the operational and executional risk attached.
I imagine your expectation is the share price of PLS will rise faster than the commodity price of Lithium (as a %). Do you have a view on how much? eg prediction of Li price rise = 100% in next 3 years, but share price rise = 150%..
This would help to understand why we as investors would invest in a company and take on the operational/executional risk, rather than just invest in CFDs/ETFs to get exposure to the commodity price rise.
David Buckland
:
Hi Lakun, this is an age old debate; the commodity v the company. To start with the company’s share price will be volatile because sentiment will play a big role, so timing is difficult. That said, a company with a 50% margin, and a 50% commodity price increase should deliver a profitability boost which is double the commodity (100% v 50%). The question will be whether the commodity price increase and the subsequent earnings increase are sustainable, as leverage applies on the way down as well!
Ramesh Pillai
:
Thanks David and Gary.
It makes a lot of sense for short/medium and long term investment.
What is your opinion on other Lithium stocks Galaxy Resources & Orcobre.
David Buckland
:
Thank you Ramesh. Yes the Montgomery Small Companies Fund currently owns Orocobre and has owned Galaxy. We like them.