Today, my ASX stock of the day is Strategic Elements Ltd (ASX: SOR). The Strategic Elements share price is certainly having a top day today. It has surged more than 170% from 6.5 cents a share yesterday to 18 cents a share at the time of writing (a new 52-week high). That means a $1,000 investment yesterday would now worth approximately $2,077 today. Not bad.
Today's gains cap off what has been a volatile year in 2020 so far for this company. Strategic Elements shares have a 52-week range of 3 cents to today's new high of 18 cents. But before today, the share price went nowhere over the past month, staying flat at 7 cents.
But why such a massive change in valuation over the space of one day? Well, the company did make an announcement to the markets this morning that seems to be why its shares are reaching for the stars today. But more on that later.
Who is Strategic Elements?
Strategic Elements is a very interesting kind of company, and one you might not have run into before. The company tells us that it "operates as a venture builder where it generates ventures and projects from combining teams of leading scientists or innovators in the technology or resources sectors."
Importantly, the company describes itself as a "registered Pooled Developed Fund (PDF)". According to Strategic Elements, a PDF means that "our investors pay no tax on capital gains or dividends to compensate for the higher risk of investing in small and medium-sized companies."
The federal government's business.gov.au website confirms this arrangement. It states that the PDF program aims to "increase the supply of capital to Australian small and medium-sized enterprises (SMEs)."
According to the government, under the arrangement:
PDFs and their shareholders receive tax benefits on the income derived from their equity investments. This is to help compensate for the higher risk of investing in SMEs. PDFs will be taxed at 15% on the income and gains derived from equity investments in Australian SMEs. Shareholders are exempt from tax on the income and gains derived from holding and disposing of PDF shares.
Strategic Elements aims to use this program to "take part in projects that explore brand new fields of innovation". However, it also notes that, under the PDF arrangement, investments in retail or property investments are not permitted.
At the moment, some of Strategic Elements' investments include an artificial intelligence and robotics company called Stealth Technologies, as well as a meteorite mining company (Australian Exploration Projects) and a company dedicated to making 'memory ink' (Nanocubes).
A new self-charging battery?
But Strategic Elements comes before us today for a different reason. It's 100%-plus share price movement this morning can be put down to one announcement made before market open: a company in Strategic Elements' portfolio is developing a self-charging battery technology. Strategic Elements' subsidiary Australian Advanced Materials is collaborating with both the CSIRO and the University of New South Wales to develop the battery. According to the release:
The battery cells create electricity from humidity in the air or skin surface to self-charge themselves within minutes. No manual charging or wired power is required. They are created with a printable ink and are ideally suited for use in Internet of Things (IOT) devices.
The company notes that, if successful, the new battery technology would have a number of benefits over the existing lithium-ion rechargeable battery technology in widespread use today. These include non-flammability, weight reduction, no need for 'plug-in charging' and reduced environmental impact.
The batteries will be made using 'battery ink' from Strategic Elements' Nanocubes, as well as graphene oxide, which is derived from graphite, a form of carbon.
Why are investors so excited about these batteries?
With the Strategic Elements share price rising by more than 170% just today, I think it's fairly safe to say investors are excited about this technology's prospects. But why? I think the answer lies with this technology's potential applications. Strategic Elements is very keen to tout the application of these batteries to the Internet of Things.
Part of the company's release states:
The global battery market for IOT is already significant with US$8.7 billion in 2019 and is projected to grow to US$15.9 billion by 2025. The growing need for thin and flexible batteries in IOT and medical devices, along with inherent advantages of micro batteries provides significant opportunities.
Rechargeable batteries are already being used for new applications. Most famously perhaps is by Tesla Inc (NASDAQ: TSLA). If Strategic Elements is really onto a winner here, it would have virtually limitless applications – including in electric vehicles. Further, companies working in this area, like Tesla and Nio Inc (NYSE: NIO), have recently seen significant investor interest and share price appreciation. I'm sure some of this goodwill and sentiment is flowing into Strategic Elements today.
This is an interesting one to watch going forward!
