Renowned stock picker David Paradice looks like he’s on a winner with uranium stocks.
His Paradice Investment Management boutique funds management firm has stakes in string of small and emerging uranium-focused miners that have surged in value this year.
Driving the uplift has been a combination of clean energy demand and uranium’s carbon-free status.
The recent announcement that Australia will build nuclear-powered submarines sharpened the focus on the sector, with uranium prices recently hitting six-year highs.
But it is an industry that Paradice has been increasing its exposure to in the past year, picking several winners in the process.
Paradice Investment Management, which manages more than $17bn on behalf of its clients, ranging from superannuation and investment funds to wealthy individuals and families, is a substantial shareholder in a number of ASX-listed uranium stocks.
It has a big stake in Paladin Energy, which has a 75 per cent stake in the Langer Heinrich mine in Namibia and exploration projects in Australia and Canada.
Paladin shares are up about 230 per cent since January 1, but fell more than 15 per cent during trading on Monday amid a general downturn in mining stocks across the board.
Similarly, Paradice has a stake in Deep Yellow that fell 17 per cent during Monday but is up about 125 per cent since January 1. Deep Yellow is another uranium stock with a particular focus on Namibia. Paradice topped up its stake in Deep Yellow in February with an $8.3m outlay that has just about doubled in value since, despite Monday’s fall.
Another Paradice holding is Boss Energy, which has the Honeymoon uranium project in South Australia.
Boss shares fell about 17 per cent on Monday but are still up 185 per cent this year.
Paradice’s firm bought four million additional shares in April, which have since doubled in value.
Meanwhile, Vimy Resources shares fell about 19 per cent on Monday but are still worth almost 170 per cent more than on January 1. Vimy has a uranium project in Western Australia and counts Paradice as a major shareholder, as well as Andrew Forrest’s Tattarang. Paradice’s firm topped up its Vimy shareholding in August.
While investors have been betting that demand for uranium will rise amid a worldwide shift to less carbon-intensive energy sources, a recent Wall Street Journal article also mentioned retail traders from Reddit’s WallStreetBets forum talking up uranium stocks as a source of investor enthusiasm about the sector. But there have also been recent reports more sceptical about the heavy metal’s prospects, noting there have been several rallies in the uranium price that later fizzle out.
Indeed, uranium-focused stocks on the ASX suffered some of the sharpest falls in value during trading on Monday, though Paradice’s various small and mid-cap funds are probably still well ahead on their investments made earlier this year and during 2020.
Some of that good performance probably comes from other mining shareholdings, including a string of copper-focused stocks Paradice’s firm is a substantial holder of, such as Aeris Resources, New World Resources and Eagle Mountain Mining.
Meanwhile, a crackdown in China that has seen several high-profile stocks slump in value has hit Paradice’s emerging markets fund in recent months.
Stocks like Alibaba, founded by Chinese billionaire Jack Ma, have been hit hard by the Chinese government’s regulatory clampdown on several former star technology stocks.
Alibaba shares, one of the bigger holdings in Paradice Investment Management’s Global Emerging Markets Fund, are down about 34 per cent in the past six months.
Besides Alibaba, giant tech conglomerate Tencent has fallen 20 per cent this year and is not even among the emerging market fund’s top 10 holdings now.
The fund underperformed its MSCI Emerging Markets Net Total Return Index benchmark by 9.42 per cent in the year to August.
Its biggest position is in Taiwan Semiconductor Manufacturing Co, up 11 per cent this year.
Indian stocks are becoming a bigger part of the fund’s portfolio, including Apollo Hospitals Enterprise, HDFC Bank and Reliance Industries – all top 10 positions now.
Apollo has doubled in value since January 1, while multinational conglomerate Reliance is up 20 per cent on the New York Stock Exchange in the same period.
The article was originally posted on The Australian here.
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