Morrison’s (MRW) Christmas Run Up

Given the way that I am largely sidelined by the journalism establishment, writing about any subject, even my specialist area of the stock market is kept to a minimum. However, with indices tumbling it seems fair to look for the few situations which may be defensive.

This is partly due to the way that historically the third week of November tends to mark a low for shares, ahead of the more benign immediate run up to Christmas. Such an observation is not based merely on seasonal optimism, but more than 30 years in and around the stock market.

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To this end it seems fair to highlight William Morrison (MRW) as a situation where the shares have maintained most of the M&A rumour originated gains, widely reported in other places over the course of this year. In addition, this stock seems to be one of those which to paraphrase Warren Buffett’s analogy, is still sporting a robust bathing suit as the market tide goes out.

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What is interesting apart from merely the 4% dividend and the price action outperformance of late, is the way that having broken above 230p in April, this level has proved to be support on a consistent basis. It is also noticeable that the gap higher for the stock in March at 210p remains unfilled, and there is support at the floor of a rising March trend channel at 242p, as well as the 200 day moving average at 244p.

The implication is that provided there is no break back below the 230p support zone, we could see a technical target as high as 285p over the next 2-3 months – at the top of this year’s trend channel.. Only cautious traders would wait on an end of day close above the 50 day moving average at 252p before regarding this as a momentum play.

Otherwise, it may be best to focus on perennial bid rumours in the market regarding both Morrison, and any combination of its peers. In addition, it may presumably be better for these stocks to make a move on Morrison in the wake of the all important Christmas period. But in the meantime, it is highly likely that this company will continue to outperform in very tough stock market conditions.

Small Cap Highlight: ECR Minerals (ECR)

Gold back in the spotlight as slowing global economic growth spikes renewed appetite.

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  • Positive forecast for gold prices
  • Australia Gold production ramp-up
  • MicroCap Australian Gold explorer focus

 

Positive forecast for gold prices

 

Sharp declines in global stock markets over the past few weeks saw Gold hit a three month high as political uncertainty continues to grow across the world.

 

In August prices for the precious metal fell below $1,200 per troy ounce mark for the first time in more than two and a half years’, down 12% since April. The turn largely caused by the US Dollars unexpected performance and aggressive monetary policy marked it’s worst losing streak since 2013.

 

However, October has seen a marked turnaround in the Gold price: the yellow metal grew by 3.3% in October, and continuing into November saw $1,233 per ounce as investors and hedge funds continue selling off global equities in search of reduced risk amidst geopolitical and economic uncertainty. Safe haven demand for gold has been driven by ongoing fears of a trade war between the US and China, growth concerns in China and the ongoing Brexit saga amongst a number of other issues.

 

Observers have been universal in their support. Mark O’Byrne, research director at Dublin-based GoldCore said: “Safe-haven gold is again acting as a hedge and safe-haven asset, exactly when investors need one.” “Throughout its history, Gold has served as a stable, safe haven investment during times of economic slowdown and following the International Monetary Fund (IMF) downward revision of the global economic growth for next year we might see more investors buying up the commodity.”

 

Others have noted how the nature of intra-year seasonal cycles may are likely to lead to increase in the price of gold. The Street says “massive washouts like the one we’re experiencing in gold right now are the fathers of subsequent rallies”.

 

Speaking on the Bloomberg Markets podcast Ruth Crowell CEO of the London Bullion Market Association discussed how the groups Annual Gathering this year predicted the most bullish forecast since 2012 with a forecast of $1,585 per ounce for next October. Ruth explains that this years price is reflected by ‘the macroeconomic outlook, ultimately talking about a lot of concerns’. Meanwhile a poll conducted by Reuters this month they found that of the 39 analysts and traders polled they expected gold prices to average $1,300 an ounce in 2019.

 

Australia Production Ramp Up

 

On the supply front, according to Bloomberg the world’s largest miners look set to increase spending for the first time since 2013 while the value of sector M&A activity has hit the highest levels in six years.

 

As a result, Gold production looks to set for further ramp ups through the end of 2018 and into 2019.

 

In particular production in Australia, the world’s second-largest Gold producer, may rise to a record this year and next as a stream of new projects come on line. Comments from Australian mining consultancy Surbiton Associates in the Sydney Morning Herald highlighted how Australian gold miners, among the lowest cost globally, have enjoyed high margins in recent years, with output boosted by the strengthening US dollar, which has in turn ‘supercharged’ Australian dollar prices.

 

MicroCap Australian Gold explorer focus – ECR Minerals

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While the giants such as Newcrest Mining, AngloGold, Newmont Mining and Barrick Gold Corp tend to dominate the headlines, this upturn in sector activity has seen a marked increase in funding for small and microcap Gold exploration companies. Following a strategic financing round in July 2018, microcap Gold exploration company ECR Minerals has delivered a stready stream of exploration news updates, which has resonated among institutional and retail investors during Q3. ECR are conducting exploration activities across their numerous projects in Victoria, which is by far the most accessible and productive area of gold in Australia. In the 70 or so years from the 1850’s until the 1920’s, approximately 2,100 tons of officially recorded gold was recovered from Victoria and today it continues to be a favorite area for metal detector prospecting.

 

Listed on London’s AIM market, ECR’s exploration projects underway include Avoca, Bailieston, Moormbool and Timor gold projects in Central Victoria.

 

In mid September, ECR announced that it had ‘identified eight principle targets within the Company’s five exploration licence areas’ and had developed an exploration programme ‘designed to test surface gold mineralisation across the licence areas.’

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Bailieston drilling programme and core samples

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At the end of September the Company confirmed gold mineralisation, with 22 samples from 76 containing gold grades ranging from 0.5 g/t to 67.4 g/t (2.17 ounces per ton). Their second assay results proved positive too, with 29 samples delivering gold mineralisation ranging from 0.56 g/t Au to 22.9 g/t Au;

 

ECR’s next rock chip sampling results will come from the Creswick area, where prior mapping has revealed a large gold system. Sounds promising.

 

So whether you’re buying bullion, investing into Gold majors as a proxy for the yellow metal or speculating on Microcap Gold explorers, the shiny near term outlook for Gold, and in particular Gold explorers operating in Australia looks unlikely to be tarnished anytime soon.

Aston Martin (AML): Keep Buying The Car Not The Shares

On September 23, days before shares of Aston Martin hit the stock market I came up with the sarcastic title “A £5bn IPO: £4bn Overpriced.” For some reason even though there was a subtle haircut on the float price – clearly one or two people in the City read the article, The Charge of the Light Brigade still went ahead.

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What stood out to me was the way that in the exhaustive research via Google for the article there was not one piece anywhere questioning the valuation?

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It was either simple reporting, or the gushing James Bond’s car profile. Of course, since then there has been wailing and moaning, with apparently employees of the Great British carmaker nursing losses on the stock they were given.

Unfortunately, as we live in a world where debate and argument appears to have died with free speech, this was and is a car crash waiting to happen. It was also a situation where someone proclaiming the Emperor’s New Clothes cannot avert misfortune.

In fact, looking at the hourly chart of Aston Martin it would appear that while below the 1,450p zone, the stock could still fall to 1,200p. This is perhaps not the £4bn overprice that I suggested last month, but at least a billion or two. But then again, if you are rich enough to afford an Aston Martin, such numbers are probably rather trivial anyway.