The Omicron opportunity
2nd December 2021 |
Here we go again…
News about the “Omicron” variant of Covid-19 over the last week or so has been unavoidable. Coming out of Africa, the variant is now in the UK and elsewhere.
Some scientists are predicting this version to be far more potent than previous variants, and that it could be resistant to vaccination programmes that are currently in force.
Others suggest that it could be “mild”.
And another group of commentators are questioning the timing of the new variant – given that we are coming into the Christmas season at a time that the UK government is keen to get booster shots out to (or, more literally, into) everyone.
Whatever the outcome, the news has caused stock markets to plummet.
In the United States, the S&P 500 composite dropped by 2% on Friday. Here in the UK, the FTSE 100 was also down 3.6%.
It doesn’t sound like much… but most bear markets begin with small downwards moves.
On the trading screens, the stocks in the Frontier Tech Investor buy list, have been a sea of red ink across the board since the news broke.
One stock which fell in price was AMTE Power (LSE: AMTE) – where we had told you to re-enter the position after having been stopped out.
You will recall that since then, we opted to remove stop loss positions on all of our holdings: you can find the discussion here.
Other stocks that have declined in our portfolio include cyclical stocks, which suffered during the first lockdown of early 2020 when economic demand was hampered by lockdown restrictions.
Cyclical stocks are stocks whose performance follows the overall economy. They – and their share prices – generally outperform when the economy is growing and underperform when the economy is slowing or contracting.
This includes travel and aviation-related stocks, such as Rolls-Royce Holdings (LSE: RR), Meggitt (LSE: MGGT) and Velocys (LSE: VLS).
For example, Velocys’ share price has dropped 15.2% from Thursday’s intraday high of 9.92GBp to 8.41GBp at the time of writing.
This may look like a time for caution. In fact, for investors with the right perspective and time horizon, this is actually a time of heightened opportunity.
The share prices of several companies have now moved to within our buy limits, or are heading towards them.
The stocks which, at current prices, are BUY recommendations in the Frontier Tech Investor portfolio include:
- AMTE Power (LSE: AMTE) – a provider of specialist battery technology used in the automotive and energy sectors.
- Argo Blockchain (LSE: ARB) – a miner of cryptocurrencies, namely bitcoin.
- HYVE Group (LSE: HYVE) – a company that connects businesses and stake holders through in-person and virtual exhibitions.
- Ilika (LSE: IKA) – a producer of solid-state battery technology which targets the industrial internet of things (IoT), medical, consumer electronics and the electric vehicle (EV) industries.
- Immotion Group (LSE: IMMO) – a provider of virtual reality and simulations to tourist attractions.
- IQE (LSE: IQE) – a supplier of semiconductor parts.
- Kanabo Group (LSE: KNB) – a distributor and producer of medicinal cannabis products.
- Mirriad Advertising (LSE: MIRI) – a technology company that inserts advertising into digital content after it has been produced.
- Mode Global Holdings (LSE: MODE) – a payments platform that allows users to store, manage and trade digital assets such as bitcoin.
- Saietta Group (LSE: SED) – a manufacturer of electric propulsion motors for the transport industry.
- Spirent Communications (LSE: SPT) – a provider of network testing and assurance solutions, primarily for 5G networks.
- Surface Transforms (LSE: SCE) – a manufacturer of carbon ceramic brake discs for supercars.
- Trackwise Design (LSE: TWD) – a manufacturer of printed circuit boards (PCBs), a critical component in the functioning of semiconductors.
- WANdisco (LSE: WAND) – a provider of data management infrastructure.
The latest weakness in global stock markets means that you can buy into exciting stocks (sometimes significantly) more cheaply than in the recent past. The potential upside is greater.
Of course, we know that during times like this, a bit of reassurance never goes amiss.
Our fundamental view on all our portfolio holdings remains the same. Each stock is here on its own merit, and in our view, has the potential to deliver strong returns, regardless of any short-term market shocks.
Another thing to remember is that we’ve been here before. At the time of the first lockdown, the stock market crash felt like a graveyard for investors, one from which it would take years to emerge.
But, as we saw, it provided many opportunities. The recovery in prices happened far more quickly than people had anticipated in the darkest days of March 2020.
For instance, the S&P only took 196 days to eclipse its then all-time high after recovering from the lockdown low that month.
Remember, too, that there are reasons to believe that the world’s actual and financial experience with the emergence of Omicron will be far better than what happened following the global spread of the Covid pandemic. For one thing, a lot of people are vaccinated now – versus none back then.
We have also learned how to work efficiently and productively from home in the event that lockdowns return.
Nevertheless, remember to manage your capital carefully, and only invest money that you can afford to lose. That way, you won’t be bothered by inevitable dips in price that fearful stock market conditions will bring.
Buy list update
Mirriad Advertising (LSE: MIRI)
Mirriad is a provider of technology that inserts advertising signage into digital content after it has been produced.
In our 4 November 2021 update, we spoke of the importance of retailers’ advertising campaigns in the run-up to Christmas.
Mirriad is proving to be a key driver of these campaigns at this time of year.
On 17 November 2021, Mirriad announced a partnership with Crown Media Family Networks, a US-based media production company owned and operated by Hallmark Cards Inc.
At Christmas time, Hallmark operates its own broadcast channel, called Countdown to Christmas. The channel contains an array of Christmas programmes and films, displayed to its American audience.
In the deal, brands and operators on this channel will leverage Mirriad’s in-content advertising solution to reach audiences.
Companies from a range of industries such as automotive, retail and financial services will be using Mirriad’s solution.
In our original recommendation, we spoke of how the company’s expansion into the United States – the world’s most lucrative advertising market – is pivotal to Mirriad’s future success.
We reiterate our BUY recommendation. You can find the original recommendation above.
Saietta Group (LSE: SED)
Saietta is an engineering company that manufactures electric propulsion motors for the transport industry.
For example, it’s playing a key role in driving the transition to light EVs. These include motorbikes, scooters and three-wheeled rickshaws, which are particularly common in south and southeast Asia.
Saietta is now applying its technology to another area of the transport market.
On 15 November 2021, Saietta announced the launch of Propel, a state-of-the-art electric marine propulsion solution.
The motor is based on Saietta’s flagship axial flux technology (AFT).
There are two versions of Propel.
The Propel S1 outboard motor is equal to a 25hp internal combustion engine in terms of acceleration and speed. Unlike its competitors, the Propel S1 is designed in such a way that the motor and all the electronics are above the water line.
The Propel D1 is designed to enable boat owners to easily replace outdated diesel-powered inboard engines with an electric alternative.
On land and on water, Saietta’s technology supports official initiatives to promote a cleaner, greener world. For example, the city of Amsterdam – where Saietta’s technology is being launched – is seeking to make its canals emission-free by 2025.
We reiterate our BUY recommendation. As it’s currently within it’s buy limit. 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 EV 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.
Argo Blockchain (LSE: ARB) – Argo is the first pure-play crypto mining company to list on the London Stock Exchange. Its listing on the exchange is another indication of how quickly the transition to the new money system is taking hold. Through its powerful mining rigs, the company has the capability to mine thousands of bitcoin each year, earning potentially lucrative returns in line with the price of bitcoin. You can find the original recommendation here.
Mode Global Holdings (LSE: MODE) – Mode looks to revolutionise the way in which payments are being made. Its platform provides a seamless way to manage and spend assets from both monetary systems; the old, fiat currency system, and the new, crypto and digital assets system. We see the popularity of Mode rising in line with the wider adoption of cryptocurrencies as a means of payment. You can find the original recommendation here.
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Junior Analyst, Frontier Tech Investor
