AI stocks have been soaring – some are calling it a bubble, others say it’s just the start of a multi-year investment super cycle in technology that’s changing the world.
But with many AI stock now trading on huge valuations as investors crowd in, are there better alternatives for stock market investors?
One prominent hedge fund manager, who certainly advocates against following the heard into hot sectors like AI is Chris MacIntosh, the Chief Investment Officer of Glenorchy Capital.
In a recent investment letter seen by Asia Markets, MacIntosh named 5 stocks he thinks have the potential to gain over 300%.
A word of warning – we’d bet the house you’ve never heard of these, but MacIntosh labels them “asymmetrical opportunites”.
By this he means stocks so out of favour, and with valuations so low, the potential for explosive upside far outweighs the prospect of the companies value being able to fall any further.
5 stocks to buy in June according the MacIntosh
Valestro Energy (KLSE: VELESTO)
This is a Malaysian company that provides offshore oil and gas drilling services in Southeast Asia. It is currently trading at just MYR 0.22 (or around US$0.048).
“They raised MYR 1.8 billion of capital in 2017 to reduce debt levels. Incidentally, this capital injection is about what its current market cap is,” says MacIntosh.
Incredbily, Valestro Energy is valued at around 30% of the replacement costs of its assets. So, it’s easy to understand how a sentiment shift around this company and the offshore oil and gas sector could see the Valestro Energy share price explode.
This Bloomberg chart that shows just how out of favour this company has been with investors in recent years. Is it time for a breakout?
Atlantic Navigation (SGX: 5UL)
A warning – this is a highly illiquid Singapore-listed stock, but MacIntosh insists we hear him out!
“Have a listen to Charlie Munger speaking about what Warren Buffett did in the good old days before he was famous (check out the video below),” says Macintosh.
“As Munger said, Buffett made millions by looking for value in thinly traded securities. Only after his name got out there did he have to concentrate on buying larger cap issues. Anyway, if you don’t have a big portfolio and you are looking to deploy $10k trades or smaller, take a look at Atlantic Navigation.”
Atlantic Navigation owns a fleet of offshore service vessels – and herein lies the opportunity.
The company’s current market cap implies a valuation of around $3.7m per ship.
“Something tells me that these vessels are worth a tad more than $3.7m each,” says MacIntosh.
“Too good to be true? Well, the catch is that this is a very illiquid stock. On a good day you might be able to pick up $30k worth. If anything goes wrong, you won’t be able to offload very quickly. So by all means, have a go, but be willing to write off whatever you put into this trade.
“We see these trades as “option trades” where there is no time to expiry, unless the company goes bang.”
MTQ Corporation (SGX: M05)
This is another Singapore-listed company that manufactures equipment primarily for the offshore oil and gas sector. The company has engineering facilities in Singapore and Bahrain.
Just last month, MTQ reported revenue of $83.8 million for Singapore FY 2023 (ends March 31), an increase of 61% from the prior year.
Group CEO Kuah Boon Wee said:
“The group will also accelerate its efforts to look for new areas of growth amid current high utilisation levels. The Middle East is an important area in our future growth.”
According to MacIntosh, this reaffirms his own view that the offshore oil and gas sector is on the cusp of a golden era.
Matrix Composites & Engineering (ASX: MCE)
To Australia now, for the next stock to buy in June, and it’s another company exposed to offshore operations.
Matrix Composites & Engineering manufactures composite products primary for the defence, energy, resource and transport sectors.
MacIntosh believes the company is being overlooked by investors and it could be another primed to rally as demand for offshore services ramps up.
ASL Marine Holdings (SGX: A04)
Back to Singapore for the fifth and final stock to buy in June.
ASL Marine Holdings is a vertically-integrated marine services group principally engaged in shipbuilding, ship repair and conversion, ship chartering, engineering and other marine related services, catering to customers mainly from Asia Pacific, South Asia, Europe, Australia, and the Middle East.
Along with providing vessel repair and conversion services including retro-fittings, life-extensions and repair of various types of vessels, ASL also owns a young fleet of vessels including barges, tugs, anchor handling tugs, supply vessels, platform support vessels, diving support vessel, crane barges, and more.
This fleet is chartered to customers from industries ranging from offshore oil and gas, marine infrastructure, dredging, land reclamation and marine construction works and marine transportation of cargoes such as coal building materials and aggregates and heavy equipment and structures.
The company has a market cap of just US$32 million.
A recent spike in the ASL Marine share price suggests something a “little out of the ordinary” is going on, say MacIntosh.
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