Amid family gatherings and get-togethers with friends the consensus has been pretty broad – 2023 has been tough and many of us will be glad to see the back of it.
But next year could be very different. Inflation is falling and interest rates are expected to head lower, easing the burden on households.
Gentler economic conditions should feed through to a more upbeat mood among investors, bolstering share prices among smaller stocks and those hit hard in recent times.
Midas tips this year aim to offer something for every investor, from the adventurer to the traditionalist.
But all our companies benefit from experienced bosses, with a clear focus to deliver results for shareholders and customers.
Taking off: Empire Metals mines titanium, a key ingredient in aircraft and tanks
Empire Metals
In 1973, as Middle Eastern oil producers curbed exports and prices rocketed, the US government produced a paper on 65 minerals and metals that were considered important for the economy and national security.
The report questioned the role that each commodity played, whether it was mined domestically and, if not, where it could be found and in what quantities. Half a century later, America still publishes a list of critical minerals. Now, however, the UK and others have begun to do the same.
Most reports include titanium. Light, strong and resistant to rust, the metal is a key ingredient in tanks, aircraft, submarines and missiles, not to mention golf clubs and crutches.
Titanium dioxide is even more widely used. Bright white, it acts as a pigment in paint, plastics, enamels, paper, cosmetics, toothpaste and even sunscreen, as it prevents ultraviolet rays from reaching the skin.
Empire Metals, a small AIM-listed company based in Western Australia, is believed to have discovered one of the biggest titanium deposits in the world. The shares are 9.3p and if early indications are right, they will rocket.
Empire is run by Shaun Bunn, a 62-year-old metallurgist who has spent his career in the mining industry, exploring, developing and bringing projects into production. Bunn joined the business in 2021 and less than a year later, acquired three new projects, including Pitfield, a couple of hours’ drive north of Perth.
Covering an area three times the size of Birmingham, Pitfield was expected to produce copper. But when Bunn and his team started drilling, they found reams of high-grade titanium.
And the more they drill, the more they find. Samples have been sent to government laboratories for further analysis and every test suggests that Empire could be sitting on an extraordinary discovery, a massive titanium resource, hiding in plain sight because no one expected it to be there.
There is much work to be done. Empire is valued on the stock market at £55 million and has around £3 million in the bank. The group has no revenues so Bunn has to watch the pennies at every stage. But experience in the field has taught him how to be frugal and pragmatic – and Pitfield’s potential is immense.
The next few months will be busy. New holes will be drilled, fresh tests undertaken and a strategy will be developed to maximise Pitfield’s potential. Sensibly, too, Empire’s other projects have been put on the backburner to ensure cash is used to best effect.
MIDAS VERDICT: Early-stage exploration firms are not for the faint-hearted but adventurous investors should give Empire a go. Titanium is an essential component of daily life and military might but China has the lion’s share of the market. Western governments and companies are keen to source this mineral from friendlier climes and Pitfield fits the bill. At 9.3p, Empire shares could go far.
Traded on: AIM Ticker: EEE Contact: empiremetals.co.uk or 020 7236 1177
Royal Mail
Going to deliver?: For investors with patience, now could be a smart time to buy
Remember when first-class letters took a day to arrive, second-class letters took two and prices for both were eminently reasonable? Today, stamps cost a fortune, deliveries take days and reliability seems a distant memory. No wonder Royal Mail is one of those companies everyone loves to hate.
The shares give precious little cause for cheer either. Floated at £3.30 in 2013, the stock has roller-coastered since but is now just £2.72, halving in value over the past two years alone. The name has changed too. No longer Royal Mail, it is now International Distribution Services (IDS). The name sounds almost ominously bland but offers a clue as to why these shares are worth a closer look.
In 1999, Royal Mail acquired German Parcel, a national delivery business. Renamed General Logistics Systems (GLS), the business expanded and developed down the years, adopting technology to bolster efficiency and enhance customer service.
Some consumers are unconvinced but GLS has become an international business, operating in 40 countries, including America. Back in the UK, Royal Mail has struggled and losses have grown.
IDS financial results showcase the problem. Last year, the group delivered sales of £12 billion, with more than £7.5 billion attributed to Royal Mail. But union stoppages and poor productivity meant that the UK business generated losses of more than £1 billion. GLS, by contrast, produced a tidy £300 million profit.
Half-year figures, released last month, show more of the same – GLS good, Royal Mail not so much. But there are early indications of change. A new boss was appointed in the summer – Martin Seidenberg, former head of the international business. Union disputes have been resolved and there is a focus on improving productivity.
Transformation will not happen overnight. But for investors with patience, now could be a smart time to buy. Analysts believe that GLS alone is worth upwards of £3 a share while Royal Mail should be worth at least that. Letter sending is in decline but parcel volumes keep growing and Royal Mail has around 30 per cent of the market, way ahead of Amazon, Evri and DPD.
The group’s share register inspires confidence too. Billionaire Daniel Kretinsky is the largest investor, with a 27 per cent holding. Known as the Czech sphinx, Kretinsky has a habit of picking unfashionable companies and making a killing when they come right.
Likewise UK investment firm Redwheel, with 10 per cent of the shares.
MIDAS VERDICT: International Distribution Services has been through the mill but at £2.72, the shares should deliver rewards in time. Buy and hold.
Traded on: Main market Ticker: IDS Contact: internationaldistributionservices.com or 0871 384 2656
Land a bargain as economy improves
Land Securities
Commercial property firms have been through the wringer lately. Even when borrowing costs were low, the rise in online shopping left bricks-and-mortar retailers looking vulnerable, while the craze for working from home hit office valuations.
Soaring interest rates made matters even worse and shares in Land Securities, Britain’s largest property firm, have sunk from more than £14 in 2015 to £7.05 today. At that price, the stock offers plenty of upside – and dividend payments are attractive too, with 39.5p pencilled in for the year to March, putting the shares on a yield of over 5.5 per cent.
Bright prospects: Land Securities owns shopping malls nationwide from Glasgow to London
Land Securities owns shopping malls nationwide from Buchanan in Glasgow to Gunwharf Quays in Portsmouth to Piccadilly Lights in Central London. Traditional City offices were a big part of the portfolio too but chief executive Mark Allan has moved with the times, reducing Square Mile square footage and increasing West End exposure.
The strategy has paid off. Vacancies are down, lettings are up and Central London properties are 99 per cent full.
Regional developments are in the mix too, as well as urban regeneration, such as Mayfield, a pioneering project in the heart of Manchester.
MIDAS VERDICT: Land Securities has had a tough few years but prospects are much brighter. At £7.05, these shares are a buy.
Traded on: Main market Ticker: LAND Contact: landsec.com or 020 7413 9000
Agronomics
Every year, around 80 billion animals are slaughtered for meat, and around two trillion fish. The industry is vast, prone to controversy and accounts for more than a quarter of greenhouse gas emissions worldwide. Nonetheless, little beats a juicy steak, a piece of fresh fish or even a cold turkey sandwich after Christmas.
Perhaps that is why, despite the hype, less than 5 per cent of the population consider themselves to be vegan – and many waver. Sales of plant-based products have fallen and shares in companies such as Beyond Meat have plummeted.
Agronomics is different. The company offers consumers all the good things about meat, fish and dairy products without harming animals or the environment. It was co-founded by Jim Mellon, an entrepreneur with a history of spotting new trends and a fortune estimated at more than £800 million to prove he is usually right.
By his side is chairman Richard Reed, who set up Innocent Drinks in the 1990s and sold it to Coca-Cola for several hundred million dollars.
Mellon and Reed have had less luck with Agronomics, as the shares have fallen from 29p to 9.5p since 2021. But the stock now looks like a bargain. It invests in companies that make meat and fish substitutes not from plants but from the cells of real creatures. Tissue samples are taken from an animal, special cells are isolated from these samples and they are turned into meat or fish over a period of days or weeks.
The process relies on clever scientists and sophisticated technology but it does not use artificial ingredients, it does not involve genetic modification and the results look and taste like the real thing, from beef to top-grade tuna.
There are 27 businesses in the portfolio, including companies that make chocolate, coffee, oil and dairy produce without going near a field or farmyard. Agronomics also owns 38 per cent of Liberation Labs, which is building an ultra-modern facility in America’s midwest to help food pioneers develop products. The site should be open for business in 2024 and is forecast to generate revenues of around £20 million from 2025.
Mellon and his co-founder Antony Chow expect several investments to receive regulatory approval over the next few months as well, paving the way for commercial sales.
MIDAS VERDICT: Scientists, laboratories and cells conjure up images of Frankenstein foods rather than tempting cuts of chargrilled sirloin. However, forecasters believe that cultivated meat will be a £20 billion-a-year industry by 2030, not replacing the foods we know and love but rather complementing or supplementing them. Agronomics provides investors with a chance to access this market at an early stage and the shares, at 9.5p, are worth a punt.
Traded on: AIM Ticker: ANIC Contact: agronomics.im or 01624 777568
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