Ask A Fund Manager
The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Alto Capital investment advisor Tony Locantro discusses two ASX shares that are ready to break out.
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The Motley Fool: What are the two best stock buys right now?
Tony Locantro: Proteomics International Laboratories Ltd (ASX: PIQ), they're in the mid-eighties [cents]. They have developed the PromarkerD test which can pick up a diabetic kidney disease before it happens, well in advance. The science is proven.
They just need to roll that out, [and] look at reimbursements. They've been able to manufacture 50,000 components to get that test out.
They've announced some licensing of an esophageal cancer test as well. They're working on that. And recently, they came out with some positive biomarkers for endometriosis, which affects one in nine women, and this could lead to the world's first non-invasive test because it does take years to diagnose.
The company has some laboratory services which it provides, and the revenue matches the cash burn but you think that their expenditure will increase. The market cap is undemanding at around $85 million. Solid management that owns a lot of the company and I think it has outstanding growth.
It's an outstanding growth opportunity in the biotech sector.
The second stock I'm buying is a company called Maronan Metals Limited (ASX: MMA). I should disclose that I was heavily involved in the initial public offering (IPO) at 20 cents. The stock is now trading at 34 cents.
So, they're about to drill at the Maronan lead, silver and copper gold resource in the Cloncurry region of North Queensland. It is already a sizable resource that requires deeper drilling to expand on the 30 million tonnes at 6.5% lead. That includes a hundred million ounces of silver. They also have a separate copper gold resource that's around 11 million tonnes for 300,000 ounces of gold and some copper.
It's in that vicinity of other major mines, and it could be part of a consolidation play in North Queensland. And the company's capped around $50 million and has recently raised $15 million in its IPO.
Again, we have extensive holdings, but it's one of these companies that has an existing resource. The grades do get better with depth, so they're trying to basically drill and increase the resource. There was a mining study completed in 2016, which showed favourable mining optics.
So, highly speculative, but those are my two best buys on the market at the moment.
MF: With these minerals companies, are you ever worried about the cyclical nature of commodity prices?
TL: No.
MF: Because they're mainly exploratory companies that you're looking at?
TL: Yeah.
At the moment, a lot of these mining companies are being hit with COVID issues. They've been hit with cost blowouts. A lot of the gold producers are now having to add dollars to their all-in sustaining cost.
But my theory is that a good resource will override any commodity price or cycle. And even though they're higher risk, you're still in that exploration phase where you've got to move through DFS [definitive feasibility studies] really to get towards production.
So a big resource, I think it's going to be valued, and it should be noted that around 80% of the mines in Australia are discoveries made around 1980 or [before] that, so there hasn't been a lot of major discoveries and those that are made are rewarded with good re-ratings.
