Adelaide stocks that surged in value amid COVID crisis

For investors with nerves of steel, there have been massive gains to be had by buying local stocks. But is picking a winner these days a mug’s game?

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It’s been a wild ride for stock market investors this year, but volatility creates opportunity and for those with a canny eye for a bargain – and a fair degree of courage – there have been huge gains to be made.

On the national scene Afterpay has been an investors’ delight, hitting a low of $8.01 on March 23 before rocketing back as high as $76.62 on July 10 for a 9.5x return.

The buy now, pay later company is now valued at about $18.8 billion – not bad at all for company projecting earnings of just $20-25 million for the past financial year, excluding significant items.

Nick Molnar, CEO of Afterpay, at Bondi Beach.

But closer to home there have also been huge gains to be made across a number of shares.

And it was March 23 – the day the ASX-200 hit a low of 4564.03, down from well over 7000 points in mid February – which was the day to buy.

Adelaide’s largest listed company, Santos, actually hit its low a few days before this, getting down to $2.73, a month or so before oil prices actually plunged below zero for the first time ever.

Santos moved quickly to reassure the market that the deep cost savings it had made since the last oil price shock placed in a strong position to weather the current storm, as well as a commitment to pare back growth spending to zero.

Santos managing director Kevin Gallagher says the company is well-placed.

The stock has since almost doubled to $5.25, after dropping back from highs above $6 in June.

Other winners in the resources field have been SA’s largest homegrown miner OZ Minerals.

With its second SA-based mine at Carrapateena coming on stream, and major savings potentially flowing through s a result of COVID-19 adaptations to the business, it’s not only been business as usual, but better than usual.

The stock bottomed out on March 23 at $5.83, and has also more than doubled to be trading at $13.49, valuing the company at about $4.4 billion.

Energy minnow Elixir Energy has delivered a more than three times return after hitting a low of 1.5c in January. With good progress at its Mongolian gas project it’s now sitting at 6.5c after getting as high as 9.5c.

And Vintage Energy, headed up by former Beach Energy execs Neil Gibbins and Reg Nelson has recovered from 3.7c to be trading at 7.8c.

On the tech and manufacturing front, communications and gold detecting firm Codan has bounced from $3.66 to more than $8, valuing the company at about $1.4 billion.

Donald McGurk, Codan managing director. The company is on track for a record profit.

In a recent trading update the company said despite some COVID-related disruptions to its business, it was on track for a record profit for the full year.

Uniti Group was hit hard by the market rout, trading as low as 75c, but has also more than doubled to be trading now at $1.61.

Aerometrex, which listed late last year, dipped to 70c, below the $1 listing price, but has bounced back to $1.30 and is predicting revenue growth of 18-30 per cent for the past financial year.

And for returns pushing beyond 400 per cent, welding technology firm K-Tig has increased from 4.4c on March 23 to 23c.

Drug developer Paradigm Biopharmaceuticals has also fared well, dipping as low as $1.08 before adding about $2 to be trading at $3.07.

Travel has not surprisingly been one of the hardest hit sectors, but with its revenues now diversified widely across public transport and domestic travel, SeaLink Travel Group shares have recovered well, up from $2.25 to more than $4.

While these numbers are all compelling, Catapult Wealth portfolio manager Tim Haselum says trying to time the bottom of the market is exceedingly difficult.

“It’s a matter of luck more than skill,’’ he says.

“It is very difficult as a result of the significant uncertainty and instability around the assumptions used in stock valuations.

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“Even when analysts agree a stock may be cheap, in a mass sell-off the question becomes, can we buy it for even cheaper.’’

Mr Haselum said going forward, there were some sectors – such as tech and gold mining – with predictable cashflows, which meant it was possible to get a decent valuation on a company.

But some, such as travel companies which are at the whim of government policies and the outcome of the COVID crisis – were almost impossible to get a good read on.

“A lot of valuations have been smashed, but the important question is where company earnings go from here, and the strength of balance sheets,’’ Mr Haselum says.

“A company may look cheap under the assumption that earnings improve, but if they don’t it could be a value trap.

“For longer term investors, you could look at airports, energy stocks or even the big banks (ex CBA) as long term, post COVID some of these are looking cheap.’’

Morgans Unley senior investment adviser Henry McQuinn said the market downturn earlier this year was a good test of resilience.

“The companies that have been able to demonstrate that their business remained resilient in face of a severe economic shock have attracted a higher market multiple and in many cases now trade well above where they were in February,’’ he said.

“These businesses primarily fall in the technology and healthcare sectors. The more cyclical businesses such as bank, constitution, property trusts have struggled in a relative sense.’’

LOCAL WINNERS

Santos

Low: March 19: $2.73

Now: $5.28

Gain: 93%

Elders

Low: Oct 30: $5.67

Now: $10.39

Gain: 83%

Codan

Low: Aug 6: $3.66, (March 23, $3.97)

Now: $8.29

Gain: 126%

Uniti Group

Low: March 19: 75c

Now: $1.61

Gain: 114%

Korvest

Low: July 22: $2.75

Now: $4.67

Gain: 69%

K-Tig

Low: March 23: 4.4c

Now: 23c

Gain: 422%

Micro-X

Low: March 24: 10.3c

Now: 17.7c

Gain: 71%

SkyCity

Low: March 23: $1.09

Now: $2.30

Gain: 111%

SeaLink

Low: March 23: $2.45

Now: $4.23

Gain: 72%

Paradigm Biopharmaceuticals

Low: March 23: $1.08

Now: $3.05

Gain: 182%

Aerometrex

Low: March 23: 70c

Now: $1.30

Gain: 85%

Prophecy International

Low: March 24: 25c

Now: 65.5c

Gain: 162%

AML3D

Low: April 20: 13c

Now: 24.5c

Gain: 88%

OZ Minerals

Low: March 23: $5.83

Now: $13.57

Gain: 132%

Vintage Energy

Low: May 12: 3.7c

Now: 7.8c

Gain: 110%

Elixir Energy

Low: January 16: 1.5c

Now: 6.5c

Gain: 333%

Clean Seas Seafood

Low: March 23: 35c

Now: 55c

Gain: 57%

Treasury Wine Estates

Low: March 17: $8.40

Now: $10.94

Gain: 30.2%