After trading Cryptos for the bulk of 2017, going back to stocks is like popping a Valium and going backwards in time. Instead of the big 50% moves in a day you might see in Crypto land you might be lucky to see a 5% move in stocks.
Considering I am taking a bit of a break for December and trying to relax with the family it seems the stock market is as good a place as any to park some funds while the Crypto space is overcome with mania. Reporting season for stocks is over and we normally do get a bit of a “Santa Claus” rally in December, plus the macro situation seems positive for sentiment after tax reform has been getting momentum in the US.
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That said, I am not really a stock market bull. I do think that stocks are generally over-valued and the global macro situation still concerns me with rising debt levels, poor government and a lot of backward policy with protectionism on the rise. So what I have done with my stock portfolio is tried to focus on companies who are either innovating or are good defensive plays that are likely to still do well if the global economy and/or the broader market downturns.
In Part 1 of this 2 part series I am going to focus on 4 of the Innovation Plays that I see having potentially good growth or good upside in the near term. A lot of these are speculative stocks so risk is moderate-to-high on them but still nothing compared to what is going on in the Crypto space right now. In Part 2 I will focus on the more Defensive Plays, which is where the Valium effect will really kick in.
NOTE – All of these stocks are listed on the Australian Stock Exchange and some of my plays are very specific to the Australian situation.
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In the US we have already seen a big move toward the legalisation of Marijuana for genuine medicinal applications. In Australia we follow the US on most policy trends and I’d expect this to be no different with a bunch of small companies setting up in 2017 to provision Medical Marijuana here too. My favourite company in this space is AusCann which is a Perth-based company with the aim of producing and providing quality, economical and clinically validated cannabis medicines. They have been granted a license to cultivate medicinal cannabis in Australia and their Chairman and founder Doctor Mal Walsher is a former Western Australian Liberal MP – so this company has important political connections and is likely to get the inside running.
| Code : AC8 | Price : 0.69 | Weight : 5% |
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We are already seeing a shift toward electric cars and with advancements in Lithium Battery technology it is possible that as the supply and economics improve we might see a major paradigm shift over coming years that will render combustion engines obsolete. There is a lot of political focus on green energy but with advancements in the efficiencies of battery technologies this sector won’t need subsidies to make a big impact as regular market forces will be very strong. One of the companies well placed to benefit from this potential new demand for Lithium is Pilbara Minerals which is sitting on one of the biggest lithium ore (spodumene) resources in the world. They are currently constructing a mine which is expected to produce 44K tonnes of Lithium Carbonate Equivalent from the 2nd quarter of 2018.
| Code : PLS | Price : 0.96 | Weight : 5% |
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In Australia betting on sports and racing has exploded over the last decade and it continues to be big business for a lot of the established gaming operators in the market. Gambling is one of those industries that also performs well even in a market downturn so this sector does tick the box as a “Defensive Play” too, but I’ve put it here because of a specific company which is innovating in the space. TopBetta Holdings cut its teeth being the first to innovate with sports and racing tournaments in Australia (think of a Poker tournament where you buy in and bet with funny money). I have played with them for years and they have a good track record of innovation, but the potential windfall here comes from the introduction of their Global Tote product. This is a Totaliser product that can compete with the big (lucrative) 3 state monopolies of NSW, VIC and Unitab by offering a Totaliser to corporate bookies at lower commission rates. One of the premier bookies Ladbrokes has already signed up and newcomer Neds came on board the other week. A few more signups for the Global Tote and this $48 million market cap could substantially improve.
| Code : TBH | Price : 0.335 | Weight : 5% |
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We have already seen how the US military has been using drone technology in the Middle East with Obamas now famous Drone Assassination Program proving that remote controlled death dealing is a trend that is only just getting started. At the risk of going a bit dark here I think it is only a matter of time until we see terrorists starting to use drone technology to fly explosives into civilian areas. When this happens we are going to need some improved defence technology to counter such a threat. I’ve invested in a company called DroneShield which is innovating with anti-drone technology for detection and neutralisation of drone threats. They have a product called the DroneGun which can effectively shoot hostile drones out of the sky. Whether it’s a new outbreak of war or a major terrorist incident I can see governments throwing money at companies like this because we will need this sort of tech when the inevitable happens.
| Code : DRO | Price : 0.19 | Weight : 5% |
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So there is a peek at some of my Innovation Plays and adding up the weights it only comes to 20% of my share portfolio at the moment. All of them are small-cap speculative plays and the bulk of my portfolio (the other 80%) is allocated to more Defensive Plays which I’ll outline in my follow up post.
DISCLAIMER – This information is for general information only and should not be taken as financial advice. I am not a financial adviser and I encourage all readers to seek independent financial advice before investing in any of the above stocks.
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