Investor Insight 20 basket outperforms during turbulent first quarter

Purple’s investor relations publication Investor Insight reflects on a turbulent first quarter, and takes stock of the performance of the ‘Investor Insight 20’ – a basket of 20 ASX-listed companies spread across the resources, technology and property sectors.

The first quarter of this year has thrown up far more surprises than two years of a pandemic managed.

A long-anticipated market correction in January following an incredible bull run in 2021 wiped about 10% from equity markets before the fast-spreading Omicron variant caused renewed headaches for businesses emerging from long lockdowns.

And then Russia’s invasion of the Ukraine ratcheted up market volatility to a whole new level.

The Investor Insight 20, a basket of stocks across the resources, technology and property sectors (see footnote), clocked a modest increase of 3.3% for the quarter to March 31, down on the 11% gain in the December 2021 quarter.

However, in comparison to the S&P-ASX 200 and the S&P-ASX All Ordinaries indices, which finished the March 2022 quarter down 1.82% and 1.28% respectively, the Investor Insight 20 outperformed the broader market by about 5%.

Savvy investors from retail through to self-managed super funds and institutional gurus preach the doctrine of diversity to hedge against volatility. And the Investor Insight 20 delivered just that, with the top-performing stock up 142% to offset that the weakest performer was down 38%.

All up, a $200,000 investment in the Investor Insight 20, spread evenly over the 20 stocks, would have delivered a quarterly gain of $9,680.

Adding to a big news week:

Russia’s invasion of the Ukraine and the West’s retaliatory sanctions against the Putin empire kick-started an energy security crisis that saw oil and gas prices soar and the uranium price – already on a tear for its decarbonisation benefits – jump to US$59 a pound while LNG may have arrived at its most bullish moment in history.

And let’s not forget the nickel panic – Russia is a massive producer of the stainless steel and battery ingredient – that forced the LME to freeze trading in the metal as prices soared past US$100,000 per tonne.

Crises usually provide stellar buying opportunities in the marketplace. And on top of the crisis cocktail of Ukraine and Omicron, global appetite for the decarbonisation push continues.

The lithium juggernaut is not slowing down and the critical minerals boom edges ever closer with the Federal and US governments throwing their weight behind the sector – the Federal Government confirming a $240 million splash on critical minerals projects and added silicon to the critical minerals list, and US Commerce Secretary Gina Raimondo committing to help finance Australian critical minerals projects through America’s export financing arms.

Core Lithium (ASX: CXO) is steaming ahead with building the Finniss lithium project near Darwin and is on track to join the ranks of ASX-listed spodumene producers by the end of the year. That list is headed by leading mining services company Mineral Resources (ASX: MIN), which has a world-class portfolio of lithium operations headlined by Mt Marion and Wodgina.

In parallel to building Finniss, Core is also busy expanding its mineral resource to extend the life of operations. The company this week delivered more exploration success news.

Just days before the news of the Commonwealth cash splash, Australia’s next rare earths producer Hastings Technology Metals (ASX: HAS) picked up a further $40 million through a strategic placement to cornerstone shareholder L1 Capital.

Hastings is finetuning debt and equity funding requirements ahead of a positive final investment decision for its world-scale Yangibana project in WA’s Gascoyne region. Yangibana will meet 8% of the world’s forecast neodymium and praseodymium demand once the project is up and running by late 2024.

Vimy Resources (ASX: VMY) and Deep Yellow (ASX: DYL) this week ended months of talks and speculation to agree the first significant uranium deal in a decade. Under the terms of the agreed scrip-swap merger, via a scheme of arrangement, Vimy shareholders will end up with 47% of the enlarged Deep Yellow.

Once the deal is done in the middle of this year, the enlarged Deep Yellow will be a globally significant uranium player with near-term developments assets in Western Australia – Mulga Rock – and Namibia – Tumas – along with one of the largest total uranium mineral resource inventories (389 million pounds) held in a listed company worldwide.

Vladimir Putin’s threat to cut off Russian gas supplies to Europe, which accounts for about 40% of the required volume, has sent panic waves through the continent and accelerated the search for alternative sources.

Credit Suisse energy guru Saul Kavonic told the Australian Financial Review Australia was perfectly placed to capitalise on “the most structurally bullish event in LNG industry history”. He said that there were not enough gas projects to meet the demand surge.

Against that backdrop and global rising gas prices, Mineral Resources’ and Buru Energy’s (ASX: BRU) high-quality, onshore gas discoveries in Western Australia, at Lockyer Deep-1 and Rafael-1 respectively, are well timed.

Footnote: Purple’s Investor Insight 20 basket of stocks is updated regularly. At the moment, member stocks are Artemis Resources (ASX: ARV), BMG Resources (ASX: BMG), Buru Energy (ASX: BRU), Core Lithium (ASX: CXO), FBR (ASX: FBR), Finbar Group (ASX: FRI), Focus Minerals (ASX: FML), Gold Road Resources (ASX: GOR), Hastings Technology Metals (ASX: HAS), Lykos Metals (ASX: LYK), Mineral Resources (ASX: MIN), Northern Star Resources (ASX: NST), Northern Minerals (ASX: NTU), NRW Holdings (ASX: NWH), Rand Mining (ASX: RND), Rox Resources (ASX: RXL), St George Mining (ASX: SGQ), Torrens Mining (ASX: TRN), Vimy Resources (ASX: VMY) and VRX Silica (ASX: VRX).

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