BUY Alert and SELL Alert: reentering a volatile battery play and exiting after a disappointing result
25th November 2021 |
The UK government is doing its bit to fight climate change.
Most recently, it has promoted the deployment of electric vehicles (EVs) – a key mechanism for reducing carbon emissions.
Aside from banning the sale of diesel and petrol vehicles from 2030, the government has announced that EV charging points will be required in all new-build homes and office blocks from next year.
Buildings undergoing “major renovations” will also require new charging points.
In total, up to 145,000 new charge points will be installed each year, from 2022.
This builds on the 250,000 home and workplace charge points that the government has already supported.
So, within just two years, the total number of charge points deployed in the UK should more than double, highlighting the accelerating transition to EVs.
These new initiatives will do the UK EV industry a power of good.
For consumers, it will boost confidence in the EV transition. Many homes in the UK currently don’t have off-street parking or garages, meaning that range anxiety is a deterrent to potential new EV users.
Further, the new regulations will ensure easier access to more charging points, at work locations and elsewhere.
At the same time, they will take the strain off existing, overstretched charge points in the UK, helping with traffic flow.
In short, the regulations place greater emphasis on the need for the charging infrastructure, the EVs that utilise it, and the batteries that power the vehicles.
As such, our optimism towards Frontier Tech Investor portfolio holdings Ilika (LSE: IKA) and AMTE Power (LSE: AMTE) is reinforced.
Ilika is a provider of solid-state battery technology, which in particular, targets the EV industry.
Its Goliath battery range can charge up to six times faster than conventional, liquified electrode lithium-ion batteries. In addition, its batteries have twice the energy density of lithium-ion batteries, meaning they take up half the volume and weight for a given electrical charge, providing greater efficiency.
It is already in the process of deploying its technology to household names in the automotive industry, including Jaguar Land Rover and Honda.
As noted below, it is one of our “Top Three” stocks to buy.
AMTE Power is a provider of specialist battery technology, also primarily for the EV industry.
It is still at a pre-commercialisation stage of development, but it continues to attract the attention of UK government-funded schemes designed to accelerate the rollout of EV infrastructure. Of note, it has received £2.3 million in grants from the government-funded scheme ULTRA, designed to bring its lithium-ion batteries to automotive readiness.
Please note, with our recommendation of AMTE, we implemented a stop/loss position also, which set an exit point at 157.5 GBp.
That price was triggered as AMTE traded below that price, effectively exiting us from the AMTE position.
As such, we must record an exit from AMTE in our buy list recording a loss of 42% on the recommendation.
However, volatility is part and parcel of the kinds of stocks we recommend at Frontier Tech Investor. And our view is typically a long-term position with our recommendations.
This means that volatility goes with the territory…
But our positive long-term view on AMTE remains. It is risky, it is pre-commercialisation, and investor sentiment towards the companies like AMTE is clearly negative.
We remain of the view that AMTE is a key player in the UK battery markets. Specifically, we believe that it is integral in helping meet growing demand for battery technology as the UK heads towards net zero carbon emissions by 2050.
While we’ve been stopped out of AMTE, we are going to re-enter the stock immediately. If you have already sold the stock then take the below action. If not, no action is needed.
Action to take: buy AMTE Power (LSE: AMTE) at current market price. You can find the original recommendation here.
Action to take: buy Amte Power
Ticker: AMTE.L
Price as of 25.11.21: 157.50GBp
Market cap: £56.37 million
52-week high/low: 337.03p/145p
Buy up to: 285p
We reiterate our BUY recommendation on Ilika as well. You can find the original recommendation here.
Stop loss positions update
In light of us being stopped out on AMTE, we have reviewed our position on the use of stop loss recommendations with our recommendations.
Our intention in providing this kind of advice is to help guide you to protect against downside risk and volatility. We’ve even used trailing stop losses to help protect against downside risk, whilst locking in any upside gain.
However, we have now come to the decision that we are going to do away with stop losses altogether.
Yes, they do protect against downside risk. But they can also, rather unnecessarily, take us out of a position far too early in a stock that’s volatile.
Volatility is part and parcel of the stocks that we recommend with this service, and our view of these investments is long term. Whilst we don’t want to deliver stocks that fall in price, there are some that will inevitably do so. Of course, we are sometimes wrong about certain stocks.
But we also expect our winners to more than compensate for any that don’t do so well. This means our recommendations have high-risk, high-reward potential.
That doesn’t mean you shouldn’t use stop losses. In fact, a prudent part of any portfolio management is to ensure you have the right kinds of exit strategies in place for stocks that underperform as much as those that deliver gains.
But that’s a decision for you to take on your own portfolio. We know the practicalities of putting conditional orders in place isn’t available through all brokers. Furthermore, it can come at an additional cost which can also hurt potential returns.
Also, it’s worth reminding you that we’re not portfolio managers. We don’t weight our recommendations and we don’t build them as part of a portfolio. Our recommendations are a buy list of stocks we believe hold potential to deliver returns for investors. How much you buy, or even if you buy them at all, is your decision to make, as is the protection plans you put in to manage downside risk.
Indeed, you may have targets and goals that mean you might exit a stock even though we’ve not issued further advice on it.
This is how we expect you would manage your stocks: take an active approach based on your own goals and plans. Have targets, know that it’s you that manages your money, no one else. We help you to do the leg work, the research, find the stocks we think have all the potential to be big winners.
We will still publish advice if we think we should exit a stock that has tanked or that doesn’t look like it will recover.
However, we will not be using stop losses.
Sell Alert: Exit Frontier Developments after the T-Rex misses the mark
Frontier Developments specialises in-game play development and design.
Like AMTE, it too has struggled recently. In fact, it has lost more than a third of its value in the space of a trading day, with its share price sinking from 2,480GBp at 2.30pm on Friday to 1,728GBp at the time of writing.
This followed an announcement that sales of its flagship Jurassic World Evolution 2 game were well below expectations.
As such, the portfolio gain has been effectively wiped and now sits at just above zero.
This is not the kind of development we would expect from Frontier Developments. Considering the last two years, with the world under lockdown, we would have anticipated better order volumes around a new game with this franchise.
This may be a bigger systemic issue. For instance, it may be that the company just isn’t developing the kinds of games that are going to get traction with PC players any more. Or, perhaps a bigger issue for PC players is that blockchain-based gaming is a lot more interesting at the moment.
In any event, failure to deliver expectations on sales of this once-popular game leaves Frontier with an uncertain future in the gaming space.
And it means that we’ve reconsidered our position in this stock. We think that it’s time to exit, without loss, and to look for opportunities elsewhere.
Action to take: SELL Frontier Developments (LSE: FDEV)
Buy list update
Immotion Group (LSE: IMMO)
And finally, we have a more positive note to finish on.
Immotion Group is a provider of virtual reality and simulations to tourist attractions.
The company’s latest development is hugely exciting.
On 16 November 2021, the company announced the launch of “Gorilla Trek” at the IAAPA trade show in Florida. It’s a virtual reality experience that allows users to engage with endangered mountain gorillas in the Rwandan rainforest.
It will help enhance user experience at zoos, which could lead to increased commercial attention for Immotion’s product.
It forms part of a growing trend, known as the Metaverse, an engaging virtual world(s) that allows users to interact within it.
Metaverses are being deployed across digital platforms, with Facebook the latest to venture into its realms, after changing its name to Meta Platforms and also investing $50 million into the technology.
We believe that Immotion’s VR technology could prove a strong revenue stream in the coming months.
We reiterate our BUY recommendation on the stock. You can find the original recommendation here.
The Frontier Tech Investor “Top Three”
Sometimes it’s hard to decide on which stocks to invest in from our buy list.
Below is our Frontier Tech Investor “Top Three” section showing three stocks in open BUY positions. If you’re trying to figure out what to invest in next, these are three that we think are a great place to start.
This doesn’t mean our other stocks are no good, this is just a tool to help you spot the next Frontier Tech Investor stock that could be worthy of your consideration.
Ilika (LSE: IKA) – Ilika is emerging as a pioneer in solid state battery technology. In particular, it is shaking up the electric vehicle battery market. Its battery interiors are solid state rather than liquified, providing a charging rate and capacity that its conventional competitors cannot rival. In addition, its batteries are used in wind turbine generators. As such, the company has two routes into the green energy sector, which is at the forefront of investors’ minds following the successful COP26 climate change summit. You can find the original recommendation here.
EQTEC (LSE: EQT) – EQTEC is a unique, green energy company that is setting the standard for sustainable energy production. Its innovative gasification technology can convert up to 50 feedstocks into sustainable energy sources. It plays a pivotal role in reducing methane emissions from rotting waste at landfill sites. This matters because methane can be up to 86 times more potent than carbon dioxide at trapping heat in the atmosphere. As a result, we believe the company has a key role to play in helping policymakers achieve stringent emissions targets in the face of COP26. You can find the original recommendation here.
Mirriad Advertising (LSE: MIRI) – Mirriad Advertising is changing the advertising game. This company has come up with a unique solution that inserts advertising into content after the content has been produced. It boosts opportunities for product placement in films and TV series, which Mirriad Advertising monetises by taking a cut of advertising campaigns. The company is expanding into the most valuable advertising market in the world (the United States). You can find the original recommendation here.
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Junior Analyst, Frontier Tech Investor
