The Aussie commodity stocks returning more than 50%
The war in Ukraine is throwing up opportunities for Australian investors with certain commodity stocks looking attractive as Russian ones are avoided.
Investors were avoiding Russian commodities and many superannuation funds and asset managers had divested from the country in light of its war with the Ukraine. This was having knock-on effects as Russia was one of the world’s largest commodity producers for materials such as coal, natural gas and crude oil which were crucial for industrial production.
Emmanuel Datt, chief investment officer at Datt Capital, said: “It is a reasonable assumption that even should a peace accord eventuate in the coming weeks, there will still be significant impact such as enduring sanctions for Russian aggression.
“These issues throw up some interesting opportunities for Australian investors with a range of potential investments available that may potentially benefit from the present and medium-term market dynamic.”
He highlighted five ASX-listed commodity stocks which could be poised to benefit as asset allocators sought alternative commodity exposure.
“All appear to be valued extraordinarily cheaply despite their strategic and profitable businesses,” he said.
These were Whitehaven Coal, New Hope Corporation, South32, Bluescope Steel and Vulcan Steel.
According to data from FE Analytics, Whitehaven Coal, New Hope and South32 had significantly outperformed the ASX 200 since the start of the year.
Since the start of the year to 5 April, the best-performing stock was Whitehaven Coal which had returned 63% compared to returns by the ASX 200 of 2.6%.
New Hope had returned 55.6% and South32 had returned 30.8% while BlueScope Steel and Vulcan Steel had both seen negative returns of 1.9% and 3.6% respectively.
Performance of commodity stocks since start of 2022
New Hope Corporation was particularly highlighted by Datt as offering attractive franking credits for investors.
“New Hope trades at just over 1x expected EBITDA at current thermal coal spot prices and is due to pay an interim fully franked dividend of 30c a share (equating to over 12% yield grossed up). The company has one of the highest franking credit balances of any company on the ASX and we expect the board to release this embedded value to shareholders in a timely manner.”
AUTHOR
Laura Dew
Recommended for you
The alternative investment manager has signalled its intentions to repackage an existing fund into a second private equity vehicle, targeting both listed and unlisted opportunities.
The acquisition of Mason Stevens by Adamantem Capital has reached completion, as the wealth platform looks to increase investment into its services for Australian wealth practices.
Platinum Asset Management and VanEck have both announced name changes to multiple of their ETFs to clarify their complexity.
Active ETFs are gaining traction in Asia-Pacific as wealth managers seek to blend the low-cost fees of passive with active management.
