The Gigantic Transfer of Wealth Coming: Opportunity in the Stock Market
On 27 October 2020, something awfully strange occurred to a mysterious, no-name stock on the ASX.
Strategic Elements is one of those weird little jack-of-all-trades tech stocks that always has a few crazy projects on the go at any one time.
Kind of like a small-cap Tony Stark (the Iron Man guy).
It’s only a $50 million company. But it has a hand in AI-powered military robots…‘nanocube memory ink’…reopening long-mothballed goldfields in New Zealand…and mining meteorite sites for precious rare earths…to name just a few of its brilliantly crazy schemes.
Normally, a Strategic Elements-type venture happily spends its life beavering away but going completely ignored by investors.
On 27 October, however, the company got noticed.
Its shares leapt from seven cents to 15 cents in a single trading session.
What got it noticed?
Well, none of the projects above.
It was a crazy little moonshot project it’s been working on regarding clean energy.
The project was so secret, the Exponential Stock Investor guys Ryan Dinse and Lachlann Tierney tell me they had no idea about it.
And Strategic Elements has been one of their buy recommendations since October 2019!
So…what caused all the fuss?
Strategic Elements has an even crazier little sub-division called Australian Advanced Materials. And it turns out these guys have been quietly working on their own sci-fi-sounding mission: Development of a self-charging flexible battery technology.
A SELF-CHARGING battery.
The company shocked the market…a market which, until then, pretty much didn’t know it existed…by announcing it’s about to achieve ‘scale up’ on the project before Christmas.
The project has even been partially funded by the federal government.
As Proactive Investors reports:
‘The battery cells generate electricity from humidity in the air or skin surface to self-charge themselves within minutes.
‘No manual charging or wired power is required as they are created with a printable ink and are ideally suited for use in Internet of Things (IOT) devices.
‘The global battery market for IOT was worth US$8.7 billion in 2009 and forecast to be US$15.9 billion in 2025.’
The stock immediately went ballistic.
Strategic Elements is now deploying its capital to dramatically accelerate development.
Its share purchase plan was suddenly oversubscribed by 330% once the news broke.
It was a rather happy surprise for Exponential Stock Investor subscribers, who’ve had the little Perth-based company on their buy list for over year.
For them, it was primarily an AI/robotics play.
Strategic Elements’ work on the wonder-battery didn’t even get a passing mention in the initial writeup.
It was a side hustle.
Not even on their radar back then.
That’s what makes it a prime example of the strange clean energy phenomenon we’re going to be talking about this week
As soon as the press release came out, the ever-technical, analytically minded Lachlann emailed Ryan to say:
‘This is some next-level stuff if it works.
The market concurred.
But here’s the thing…
Would that have happened if the company dropped this news a year ago, back in October 2019?
But I don’t think so.
Strategic Elements was a beneficiary of a new phenomenon only just manifesting in certain stocks.
Something quite distinct from the blistering run-up of conventional alternative energy stocks so far in 2020.
But that could prove to be even more profitable in 2021.
The phenomenon centres on the ‘second-order effects’ of the clean energy boom that’s unfolding right now.
And it’s very possible that, next year, you’re likely to see similar stories all over the place, in every index on the planet.
As such, you’ll see companies like Strategic Elements completely rejig and refocus their models to take this into account.
The trick going forward is to anticipate deliberately and in advance which stocks might benefit from this phenomenon next.
This is potentially huge if we have the scoop on this.
For now, I’ll hand over to normal services…
The Gigantic Transfer of Wealth Coming
Could the Aussie market breach new all-time highs in 2020? Surely that’s the big question today as we look to start the week but close out November.
How astonishing that would be after the cataclysmic collapse in March.
We don’t hear so much about the frippery and foolishness of the Robinhoodies anymore. What a distraction that idea turned out to be. This bull market is for real.
The perennial danger in the market, of course, is that just as the outlook looks solid you run the risk of buying into the top.
But you could easily counter with the idea that a rising market will draw in more of those still on the sidelines.
My bias is to that outcome. I just did a survey of my subscribers for my trading service Catalyst Trader. Low deposit rates are pushing them into the marker whether they like it or not.
And for those still in cash? They’re going backwards and they know it. There are more than a few like this out there.
I’m not sure we investors — as a collective group — are ‘all in’ yet to bring on a market top.
That’s not to say the ASX will boom to 10,000 points in the next five months. But a solid market is all we need to get some good trades and investments away.
And, as we have been covering in these notes of late, commodity prices are roaring. That’s good for the Aussie market!
Iron ore, copper, zinc, and nickel are attracting strong bids. Even coal is lifting off the floor.
It sounds too strange to say but one part of me wishes there was a little more fear in the market.
Over August and September, I was able to use some of the big down days to recommend stocks at better prices. It’s getting harder to pull that type of move.
Of course, so much depends on your time frame. My service Catalyst Trader looks for short-term moves, in about 1–3 months.
Opportunities in the Market
But if you’re prepared to look further out, the opportunities across the board loom even larger. Take, for example, the push to renewables and green energy.
The wonderful thing about this is the scale of the opportunity is still so widely misunderstood. That means the stocks can rerate for a lot longer than anyone thinks possible.
Look at the monstrous rise in Tesla since the collapse in March. It’s astonishing and breathtaking.
I say that not because of the rise, but the amount of scepticism around the stock before it happened. It wasn’t as if Tesla was a ‘new’ stock either. I’ve been following it off and on for years.
Interestingly, I happened to meet a man who works in the car industry over the weekend. He gave some wonderful insight into how the established industry views Tesla.
He gave them full credit for marketing and technology. But he said they’re weak on the core components of a global car manufacturer — high volume and consistent quality.
He also mentioned that the big Japanese and German car brands are happy to concede the early tech advantage to niche players like Tesla because they make money off volume from global middle-class buyers.
What the car companies ARE worried about is cars losing their branding power and status signalling. Uber began the push for industry towards ‘mobility as a service’.
Regardless, for our purposes today, the lesson from Tesla is that opportunity can both be apparent but still misunderstood. It’s a question of scale.
Renewable energy is not a question of a few more solar panels on rooftops and lip service to the green vote.
The economics of this is unequivocal. Solar is the cheapest and getting cheaper.
You must understand the following point to grasp the opportunity in front of us. Solar is coming to make the oil, gas, and uranium industries redundant.
That means there’s a gigantic transfer of wealth coming as the current fossil fuel earnings go elsewhere. We can thank COVID for giving us a preview of how this can look.
If you owned Flight Centre in February, you were deeply depressed in March and stayed depressed because COVID battered it so much.
If you owned meal delivery company Marley Spoon in February, you were deeply depressed in March because every stock on the market was hammered.
But by June you were riding a monstrous opportunity as people ordered your product in droves. COVID changed the world in a powerful way.
That’s the kind of switch we’re likely to see from fossil fuels to the new beneficiaries. It won’t be as fast but just as powerful.
We can already see it in the price of lithium companies. They’re moving up well ahead of the actual lithium price. Pilbara Minerals has doubled in the last month or two.
That’s the market telling you this is where the future lies. Sceptics and naysayers will quibble with the details. They did with Tesla too. But the market doesn’t care about today. It cares about tomorrow.
Editor, The Daily Reckoning Australia
PS: Why Australia is set to become the next ‘gold epicentre’ — which could result in a HUGE spike in Aussie gold stock prices. Click here to learn more.