Report Date: 23 May 2016
Where are we in the Cycle?
Exchange rate moves (and associated interest rate expectations)
are still dominating metal price directions. Improved U.S. growth outcomes
have come only after earlier momentum losses and do not signal a significant
change in the pattern of growth.
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Market Directions
Markets seem to have entered a phase of frequently occurring and small
financial market changes in expectations rather than prolonged trends in one
direction.
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Portfolio Performance and Positioning
Reflecting the macro environment, stock prices have been losing their
drive across all sections of the market. Phase III companies previously
benefitting from resurgent sector expectations have continued to lose
ground. The macro portfolio model outcome has been steady for the past
month with position reductions resulting in a continuing buildup in cash.
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Stock Reviews and Rating Analysis
Platypus Minerals (PLP:AU) is one of the most recent
entrants into the lithium space. It carries all the risks of the others but
has one important differentiating feature: it is merging with a privately
held company with a mineral extraction technology capable of processing
hitherto uncommercial lithium-bearing ores. A PortfolioDirect
report dated 13 May 2016 gave the company a mid-range quality rating with a
high risk rating pending the outcome of a shareholder meeting next week and
a hefty rights issue being finalised. Until then, investors should tread
cautiously. After that, there will be scope for rating upgrades as risks
come down and the company shows how it can differentiate itself from the
growing number of lithium look-alikes by taking advantage of its unique
positioning.
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